2013 Recap and a look ahead to 2014: Real Estate in Istanbul

Surely the big story in terms of foreign interest in property in Istanbul was the increased presence of Arab buyers from the GCC, as well as the other, less wealthy Arab states. Large Turkish property developers have even opened up sales offices in places such as Dubai and Qatar, to handle this demand.

The European buyers, in sharp contrast, were largely absent, due no doubt to economic instability at home and perhaps a lack of insight into what drives the real estate market here.

The Turkish government seems to be welcoming this inflow of capital. The locations are also spreading out, with many buyers seeking locales close to Istanbul, but offering more serenity for summer homes on Sapanca Lake, the Princess Islands and Bursa.
2014 should offer many bargains for foreign buyers, as the battered Turkish lira has seen sharp drops against all major currencies, as have many other EM currencies. Though many might argue that this shows underlying risk, or at least some uncertainty, I feel opportunistic buying and being greedy when others are fearful (according to W. Buffet) is the correct play. There are a handful of very good opportunities in the compounds not far from the city center and some of the central property has seen a rise in affordability due to currency change. The rental yield remains steady at 5-7 %, with high end properties coming in a touch lower than this. This allows the investor a cushion to hold onto a property and wait for a more favorable time to sell and repatriate funds (if so desired).

As Istanbul grows ever more international, it is starting to compete in terms of high-end pricing with heavyweights such as Moscow, Rome, and Barcelona, taking a back seat to only the giants, Hong Kong, London, New York and Paris.

The Armani Macka project

The Armani Macka project

The highest prices, as always, remain Bosphorous view properties or ones in ultra-luxurious high rises such as Sapphire, Zorlu Center and the Armani project, with one penthouse reportedly selling at 20,000 USD/ square meter.

An expensive Bosphorous view

An expensive Bosphorous view

The market is also quite varied, also offering some pretty cheap stuff in areas where mostly local developers are capitalizing on in response to large nearby infrastructural developments (Marmaray Tunnel, Third Bosphorous Bridge and the expansion of the metro system out to Sabiha Gokcen, the second airport). An increasing trend in the urban regeneration has been the deal making between developers and owners, with developers putting up the cash and the know-how to re- construct properties and getting apartments in the new construction in return. Until now, this has been almost exclusively a local effort, as foreigners are unlikely to be able to negotiate these deals and they are not large enough for property funds.

So, while it has been a see-saw year for real estate in Istanbul, 2014 is likely to see more of the upwards and onwards, though tempered,  type of momentum. There may be  certain property types exhibiting bubble-type characteristics, but it would seem imprudent to bet short wholesale against the entire market.
On a final note, it seems every year that I have lived in Istanbul, there has been a noticeable uptick in a certain nationality (often for very different reasons) being added into the mix of purchasers in Istanbul. I remember one year being suddenly inundated with Iranian clients. Then there was the Irish (alas, there was a quick end to that one with the implosion of matters at home). Then the Azerbaijanis, Kazhaks, and other Turkic countries. Last year, as I noted above, Arabs from various countries.
As the weather worsens and client flow is coming to a temporary halt, I sit and wonder what the surprise for next year will be. Chinese? Indians? Nothing would surprise me, as Istanbul is like the ink blot test in that people usually end up finding something they can identify with here, be it in their minds or real. And that should keep Istanbul on the list of places to invest in 2014.

Take a look at our properties that are personally handpicked and vetted by us. We deal in both quality complexes and properties in central Istanbul. www.lillimont-istanbul-realestate.com

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