Despite the global economic slowdown the residential market in Istanbul remains buoyant, according to Jones Lang LaSalle's new report Istanbul Real Estate Overview. The city offers considerable long term opportunities as residential demand continues to outpace supply; yearly requirements for residential units are set to remain at 250,000 until 2015 while supply is estimated to only reach 180,000 units per year according to the Real Estate Investment Trust Association.
Avi Alkas, Chairman of Jones Lang LaSalle Turkey, said: "The residential market in Istanbul has undergone rapid development over the last five years, and market drivers remain strong, creating further room for continued growth. The city offers huge potential with an expanding middle class and their strong investment intentions, ongoing migration into the capital, as well as the need to replace the existing earthquake-vulnerable stock. The global economic downturn may result in a slowdown of some luxury residential projects in the coming years, but demand from the middle classes is expected to remain strong."
The shortage of available land in the centre of Istanbul has pushed up market prices, and forced residential developers to expand towards the city's periphery. These emerging areas are being supported with planned transport links, while regeneration plans aim to move industrial production to the outskirts of the city to help the development of residential areas within the city center.
Alan Robertson, Managing Director of Jones Lang LaSalle Turkey, said: "The global economic slowdown has caused a modest correction in residential prices but on the whole Istanbul's residential sector is proving more resilient compared to other major cities around the world. The population is projected to reach 14.5 million by 2015, creating an estimated 1.18 million extra households and this potential growth means that major developers are continuing with large residential projects. The city's combination of size, scale and location, strategic commercial position as well as strong retail market will also enhance the residential sector's potential over the long term."
Currently, the lack of an efficient mortgage funding infrastructure has caused an imbalance in the residential market. The greatest level of demand comes from the middle and lower income groups while private developers aim projects at upper-middle and top income groups due to high land prices. However, the mortgage market in Turkey is still in its infancy and shows strong potential for growth. Avi Alkas concluded: "Supported by the rising purchasing power of the middle income groups, there will be a substantial rise in the availability of mortgage loans over the coming years and this will cause market potential to enhance as the need for mid-range residential projects increases over the medium-term."