What do you think are the main challenges international investors face when entering the Turkish market? The Turkish real estate market is really an attractive and welcoming one, but also full of difficulties if not well managed. Many global firms have tried but left the market due to wrong strategies, bad execution and/or wrong local partners.
Most of them were opportunistic companies, blinded by the global boom and aimed at fast and easy profits. Only investors with strong strategies, experience, capital, and strong teams were successful and are still active in Turkey. The Turkish real estate market however, made huge progress in the last decade with the experience derived from these international companies.
Before 2005, the market was immature and not really an investment market, but rather a development one. Consultants were mostly inexperienced; local potential partners lacked corporate governance, project financing, statistics, and transparency were missing and Turkish bureaucracy was upsetting.
In 2014, the Turkish real estate market is a more mature one. This is partly due to serious real estate developments, transactions, the activity of professional players, improved laws and regulations, and great demographics; Turkey also registered a significant growth in the economy compared to developed markets, which have been fighting the crisis since 2008.
Akasya Park Umraniye 2_Istanbul_credits@ECE
Due to the construction boom in recent years and the current economic state of the country, real estate is now at the forefront and impacting the change. How can risks in this market be diminished and what do you believe will be a good way to manage this risk? Turkey had record-breaking GDP growth and a remarkable FDI for several years and was not affected by the global mortgage crisis. Real estate has always been a trustworthy investment for local players as real estate prices have not declined for decades.
At present, our economy seems to be more dependent on the real estate activity with further urban regeneration movement, which shows signs of risks due to rising stocks of new homes, offices, and retail spaces. Risks are noticeable and there are several ways to mitigate them, but the political agenda with three elections in just 12 months, remains unimportant to date.
What Turkey needs to do is, avoid new risky developments under control and require financial capability before issuing permits. A similar law was recently passed for new home sales; insurance requirements were introduced. The same should apply for commercial developments since office, retail and hotel developments were also booming while stocks were rising.
What are the main steps Turkey needs to take to improve the economy’s increasing volatility? Our current account deficit problem resulted mainly from Turkey’s energy bills, which amount to US $25-30 billion annually; this problem has to be resolved by making use of hydro, wind, sun, nuclear etc. energy sources. Energy consumption is rising with growing population, industry, economy, urbanization and modern living etc. Turkey will be one of the G10 economies once it solves the energy dependence issue.
Emaar Square,Camlica, Uskudar, Istanbul@Emaar
Which Turkish markets outside Istanbul do you think are good investment options? Istanbul likes to compete with London, Paris, Berlin, Moscow etc. and second or third-tier cities are overlooked even by local players in Turkey. However in the past five-six years, many secondary cities were assessed and were found sustainable for commercial and residential developments, but with lower profit margins.
Although the most profitable and most competitive market is Istanbul; Ankara, Izmir, Antalya, Bursa, Trabzon and Gaziantep all had serious new developments of shopping malls and hotels. Office developments are not like shopping centers which are supported by retail brands eager for expansion. Compared to Istanbul, there is very little demand for modern offices in most of the above mentioned second-tier cities. Hotels have expanded remarkably throughout Turkey due to touristic and business related travels, but mostly with franchise or management contract deals.
In your opinion, which countries if not European will be investing into Turkey in the near future? Which segments will investors mostly be interested in? Apart from European investors, there are investors from the US, Russia, Canada and Gulf countries in Turkey. Nowadays, we see additional interest from Asian countries such as Singapore and Malaysia, this trend might continue in the near future. In terms of sectors, hospitality and health care investments seem more appealing for international investors since currency risks are diminished and deal sizes are more attractive.
