Turkey Economic Factors

Turkey has many market drivers that make it an ideal location currently for property investment. Here we look at some of the reasons why Turkey is one of the world’s hottest investment property locations.

  • Excellent capital growth projections of around 25% per annum

Land prices in Turkey have risen in recent years and, in many cases, doubled. In 2005 to 2006, property prices have risen by 25–40%. Recent research shows that by comparison investments made since 1994 have yielded the following average returns:

  • Stock market - 18% (gross)
  • Turkish property - 568% (net)
  • Pension plans significant loss (net)
  • (Source: invest-in-turkey.co.uk)
  • In the opinion of ‘A place in the Sun’ in the October 2004 edition of their magazine, price increases in beach areas are expected to rise initially by 50% and then over the next two to three years by 100%.

Taking an average of 25% capital growth, a property purchased at GBP 60,000 with sustained growth over five years will have a market value of GBP 183,105, entailing a huge 305% return on investment.

Turkey is just entering the EU process

Turkey is currently at the very start of the long road to possible EU inclusion, meaning there are still another 5-10 years before prices rise substantially. Prior to EU membership, there are many factors yet to be discussed and many of Turkey’s issues that need to be corrected before incorporation will be seriously considered. However Turkey has some strong backers for its entry and when it does get accepted into the EU, it is reasonable to expect the price of property to rise greatly in line with a huge surge in tourism.

Many investors are purchasing in Turkey with EU inclusion as a major driving force, while looking to take advantage of the current low property prices and growing rental market.

Turkey is at the brink of a property boom

With so many indicators, many of which are outlined on this page, its clear to see that Turkey is at the beginning of a "property boom". A boom period generally indicates a time when demand for property outstrips supply. This is currently the situation in Turkey especially in the major investment areas such as Bodrum, Istanbul and Dalaman.

Turkish economy is very strong with 5.5% GDP growth in 2005

The Turkish economy is currently very strong and undergoing much growth. After an average growth of only 2.8 % for ten years from 1993 to 2002, Turkey was able to achieve a growth rate of 5.9 % in 2003 and a substantially higher rate in 2004. Turkey now has the 22nd largest economy in the world.

Excellent value front line properties with high capital growth potential

What is really attracting interest from international property investors is the current value for money of properties in Turkey. The Turkish market still offers excellent quality properties at prices that most other locations of a similar calibre could not offer 10 years ago. These prices, combined with the outstanding expected growth and powered by strong market drivers, offer property investors a unique opportunity.

Over 25 million tourists visit Turkey each year and boost the property market

A major indication of the current state of any property market is the tourist trade. In Turkey the tourist market is expanding massively as the country gains more exposure in the international press. The possibility of it becoming an EU member country is slowly beginning to take hold.

Current demand for Turkey is reflected in the 25 million tourists it attracts per annum. This translates into solid rental yields by buy-to-let investors who purchase in the best tourist locations.

Golf tourism evolving in Antalya, making golf investments more valuable

Golf has been a strong market driver in many successful property markets around the world for many years. Spain has used golf to generate a very strong secondary season with thousands of golfers flocking to its shores to play golf during a time when they can’t play their sport at home. With golf being so popular around the world many developments are now being constructed around or near golfing facilities. Turkey and namely Antalya is no different.

Turkey offers a modern infrastructure

Many emerging markets have limited infrastructure and this is always a problem that can stunt development. However Turkey has a solid and modern infrastructure that is rapidly growing in line with its economy, tourism and property markets.

Turkey is considered to be a highly dynamic country by the World Trade Organisation

Turkey is a dynamic and emerging country equipped with a network of well-developed infrastructure and a globally competitive work force. Its unique position at the crossroads of the world trade routes and its proximity to the developing energy producing areas in the Caspian and Central Asia are factors that further raise its economic potential for the coming years.

Turkey is also home to a thriving tourist industry and a fast growing property market, attracting huge international interest.

Property prices are on the increase

Land prices in Turkey are said to have doubled over the last 2 years.

“A property that cost £35,000 in 2004 but starts from about £60,000 shows that prices have increased by as much as 30% in some areas but the build quality is of a high standard and, relatively speaking, property in Turkey remains a bargain.” (The Times Online February 2005).

No capital gains tax

Turkey also offers some tax incentives that are of high interest to property investors, such as its regulations regarding capital gains tax. If you sell your property after four years, there is no capital gains tax. Property that is sold before the period is over will be charged at the standard rate of income tax (between 15% and 35%), calculated on the difference between the buying and selling price.

General economic overview

The Turkish economy is composed of a mix of industry and commerce. Along with a traditional agriculture sector that still accounts for more than 35% of employment, it has a strong and rapidly growing private sector. However, the State still plays a major role in basic industry, banking, transport, and communication.

The largest industrial sector is textiles and clothing, which accounts for one-third of industrial employment; it faces stiff competition in international markets with the end of the global quota system.

However, other sectors, notably the automotive and electronics industries, are rising in importance within Turkey's export mix. In 2004 GDP growth reached 9%. Inflation fell to 7.7% in 2005 - a 30-year low.

Turkey offers a very competitive cost of living. This is another driving factor for tourists and those looking to re-locate. Money still goes much further in the warmer Turkish environment.

A beer will cost you about €0.60 and a meal in a restaurant starts at about €8.00. (2005 Turkish Embassy information).

Summary of economic factors that make Turkey a worthwhile investment

  • High capital growth is projected.
  • The process for incorporation of Turkey into the EU has started.
  • Turkey is at the beginning of a property boom.
  • The Turkish economy is very strong and dynamic.
  • High tourist numbers are going to increase.
  • Golf tourism is being developed.
  • Turkey has a modern infrastructure.
  • After four years, there is no capital gains tax for property investors.
  • Land prices are on the increase.
  • Front-line properties with a high return on rental or resale are still available.
  • The cost of living is low.

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