Turkey's hot property market can reward risk-takers

By Brett Corbin International Herald Tribune

http://www.iht.com/articles/2006/07/06/news/returkey.php

Published: July 6, 2006

ISTANBUL For years buying property in Turkey was perceived as risky by many Westerners. The impression was changing until recent increases in interest rates in the United States and Europe diverted investments from emerging markets, including Turkey, and the lira lost 18 percent of its value in less than eight weeks.

But some analysts say that the economic turmoil is temporary and offers opportunities for those ready to face uncertainty.

"We have not seen any sharp drops yet" in housing prices, said Vehbi Cemil Hariri, director of valuation and investment at the Istanbul offices of the global real estate firm CB Richard Ellis. "We could see some, but if you are buying in dollars you could buy cheaper."

Real estate purchases by foreigners had increased by 83 percent since 2003, and a recent report on the sector by the Raymond James investment advisory firm said the value of real estate transactions had increased to $25 billion in 2005, 40 percent above the 2003 level.

Turkish real estate circles also were energized by the expectation of changes in laws governing the country's mortgage system.

Those changes, now on hold until late autumn at the earliest, would clear the way for banks to grant long-term property loans to individual citizens, opening vast new opportunities for sales. The revisions also would give banks the ability to reclaim properties after loan defaults, eliminating the need for lengthy legal efforts.

Turkey covers 770,000 square kilometers, or 297,000 square miles. But 45 percent of the residential real estate market is in Istanbul, a city of little more than 250 square kilometers. And in a report on the second quarter of 2006, Akpinar of CB Richard Ellis wrote that high-end properties in Istanbul and Ankara were selling for as much as $3,500 per square meter, or $327 per square foot.

Historically, Istanbul was considered the gateway to the East. Its position on the Bosporus, the link between the Sea of Marmara and the Black Sea, kept it at the center of commerce and trade, and gave it a particular influence in the region.

Many people have compared the country's real estate potential with that of Spain 15 to 20 years ago, when large numbers of Britons began buying on the Costa del Sol. But Mr. Tezcan of Raymond James Securities said geography gives Turkey a greater advantage.

"Turkey is more of a hub," Tezcan said. "When the time comes, it will be more expensive than Spain."

Local analysts say there is a chronic shortage of housing around Istanbul. In 2004, estimates were that Turkey's population needed 581,000 more housing units than actually existed. And, according to Tezcan at Raymond James, that gap was estimated to still be 370,000 units in 2010.

6 July 2006