Summary

Turkey is an attractive country because of its transportation facilities, tourism, and entertainment opportunities, and convention tourism. Istanbul, as a renowned city, draws the attention of investors from all around the world. Istanbul, where Europe and Asia meet, emerges as a haven for real estate investments and is a rising star full of real estate opportunities and stands out as a haven for high value-added and profitable real estate.
High-interest rates and economic restraint have had an impact on the economy, and one of the impacts is a decline in real estate prices and a decline in the lira. The house sales in Turkey in May 2019 dropped by 31.3 percent year-on-year, totaling some 82,252 units.
The overall residential housing market has remained stagnant, while growth in house prices throughout Turkey and in Istanbul was below inflation. Excess supply created through urban transformation projects, especially in Fikirtepe and Kadıköy, has influenced the restricted growth in residential property prices overall. The surplus of supply over limited demand for housing aimed at upper-middle- and upper-income groups continues to exert pressure on prices. Most demand for housing in Istanbul is concentrated on the middle-income group, for which there is an insufficient supply of housing.
Despite the decline in government introduced incentives and legal amendments, particularly for foreigners, the market continues to maintain its contribution, emphasizing the upward trend in sales to foreign investors.
The decline in real estate properties sold continued in 2019. The number of housing units sold fell by 21.7% in the first half of 2019 on the YoY basis to 505,796 units. Though the housing index in Turkey increased to 114.60 index points in September from 113.10 index points in August of 2019, the housing index in Turkey averaged 76.02 index points from 2010 until 2019, reaching an all-time high of 114.60 index points in September of 2019.

Key Market Trends

Increasing FDI Flow in the Residential Real Estate Market in Turkey

The number of house sales to foreigners has accelerated in Turkey due to legislative amendments that eased citizenship with investment limits for foreigners, campaigns launched by real estate developers and banks, and spiking foreign currency that brought an annual record of 78.4 percent increase in 2018, compared to the previous year.

According to official sources, the country's most populous city, Istanbul, has continued to be the top choice for foreign buyers. Residential property sales to foreigners in the city in September 2019 increased by 7% year-on-year to 1924, compared to 1799 in September 2019. On the other hand, when it comes to nationalities, Iraqi citizens continue to top the list of foreign buyers in residential properties. Iraq was followed by Iran with 509 units, Russians with 285 units, Afghanistan with 183 units, Saudi Arabia with 157 units, and Germans with 155 units in May 2019.

Chinese investment in Turkey has increased dramatically, and it is expected to increase in the coming years. They generally invest in luxury properties, and beautifully designed five-star managed apartments, with services and excellent facilities.

Decrease in Sales of New Homes in the Residential Segment

In Turkey, new home sales refer to the first-time sale of a house that was bought through a landownership agreement made between buyers and firms, or persons that build residential. New home sales in Turkey averaged 48,758.25 units from 2013 until 2019, reaching an all-time high of 74,815 units in October of 2018 and a record low of 23,265 units in June of 2019.

The overall residential sales for Turkey suffered a decline of 21.4% in the first half of 2019, compared to the same period of 2018. The decline in mortgaged sales was 58.9% in the same period. Overall sales and mortgaged sales in Istanbul declined by 16.2% and 61.2%, respectively, in the same period.

The proportion of first-hand sales in overall sales between 2014 and 2018 stood at 46%-47%.

Competitive Landscape

The residential real estate market in Turkey is fragmented and has a highly competitive environment in order to capture limited demand between the property owners. Lack of available land for development in city centers, particularly in Istanbul, has forced residential developers to shift toward the periphery with large-scale projects. A mass housing development is also increasing rapidly. The Housing Development Administration (TOKI) is leading mass housing development and regeneration projects, with a focus on providing social housing for low and middle-income households. Improper city planning and poor infrastructure, due to rapid urbanization have created a demand for earthquake-resilient homes in Turkey.

Turkish property developers have established their international offices for attracting prospective foreign investors and promoting their projects. Investors from Qatar, Russia, Iran, Saudi Arabia, Turkic Republics, United Arab Emirates, and Azerbaijan have shown their keen interest in Turkish projects.

Additional Benefits:

The market estimate (ME) sheet in Excel format
3 months of analyst support

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