Istanbul – Great investment in a great city
Turkey’s ever-growing economy, large young population, growing number of wealthier consumers, and ongoing housing shortages are all important factors to consider when it comes to that country’s real estate sector. Turkey’s real estate investments were $1.1 billion in 2006, and the market will grow to $4 billion in 2007, according to the Wall Street Journal.
Istanbul is of significant importance for the real estate investment boom in Turkey. Istanbul has a population of around 14 million, and with a share of 35% of Turkey’s Gross National Product (GNP), it is an important commercial and cultural center in the region. The city physically represents only 0.7% of Turkey’s total land area, yet Istanbul holds 31% of the country’s total housing stock. Istanbul recently topped an Urban Land Institute/PWC survey for the best development prospects, outpacing 26 major markets, including Moscow, London and Barcelona.
Due to high population growth and increasing urbanization rates, the demand for residential housing is increasing rapidly and shows no signs of slowing down in the near future. The Turkish construction sector has recorded average quarterly growth rates of 21.2% since 2005, a figure that is substantially above the country’s GDP growth. The construction boom helped the housing gap narrow significantly, yet there is still a shortfall of 150,000 units per year. Prices have gone up 100 percent in two years in Istanbul. Buying an apartment costs EUR 2,500 per m2 in the city center and EUR 2,000 per m2 in the city’s satellite cities. The Istanbul property is expected to generate an average rental yield of 8% and capital growth of 12.5% per year.
Most of Istanbul’s recent city developments have been mixed-use, consisting of a mix of shopping malls, office buildings, luxury urban residential apartments, and hotels aimed at the upper and international market. Apartments for this type of upper market apartments and villas range from EUR 2,500 per m2 to EUR 6,000 per m2.
The 179 apartments located in the iconic Kanyon residential/commercial complex, completed in 2006, are the latest example of a large-scale mixed-use project. The resale value of the one-bedroom apartment is now €350,000, double its original price. Kanyon is an open-air retail emporium that replicates the shape of a natural canyon and creates a naturally refreshing airflow. This is a complex that includes a four-story shopping mall, a 26-story office building, and a nine-screen movie theater. It has 160 stores selling mainly international luxury goods and brands such as Harvey Nichols and Hakkasan, which is opening its first restaurant outside of London, occupy three floors.
Turkey’s growing economy and higher income level among the young population is generating more investment, especially in shopping malls. Istanbul has 39 modern malls, of which 22 were built after the year 2000. There are 16 more malls under construction.
With this seemingly endless list of Kanyon-like projects either on the drawing board or under construction, the housing boom seems to continue. No longer just a city of mosques and bridges, Istanbul should be a serious port of call for property seekers and investors.