1 August 2012
Overseas Property Investment: Emerging Turkey vs Established Favorites
Turkey is making a name for itself in the overseas property world, but the same strengths that are making it so popular are also acting as a drawback against other markets. Spain and Greece have thousands of heavily discounted properties on sales, while Turkey has none or certainly very few because its property market is so strong and vibrant.
But of course, Turkey property is comparatively much cheaper than its established counterparts anyway, especially property in Altinkum for example, which is among the cheapest in the world.. But investment isn’t just about buying cheap, it is about buying a property with investment potential at a value where gains can be maximised, so let’s weigh up the options and see what we come up with.
Comparing Property Investments
Buy to Let
For those that don’t know, buy to let is buying a property to let out on a residential basis; people live in your property and pay you rent. In this type of investment Turkey is capable of beating the established markets because its emergence as a regional power is generating exceptional demand for rental accommodation.
The Turkish economy was the fastest growing in Europe in 2011 and continues to grow well this year. The rapid growth in the economy is reducing unemployment and growing the middle class in the country. At the same time Turkey has one of the fastest growing populations in the world. As the population grows in affluence and numbers it continues to generate exceptional demand for quality rented accommodation, which is still in short supply in Turkey.
Istanbul is the focal point of the buy to let boom as it has the fastest growing population in Turkey and one of the strongest job markets. Developers in Istanbul regularly report demand outstripping supply far faster than they can build to catch up with. As a result rental yields in Istanbul are over 6%, and other cities like Izmir and Antalya are not far behind.
Sure, there are obviously buy to let opportunities in the likes of Spain and Greece, but Turkey offers by far the strongest future.
Buy to Sell
In this investment our profit will come from capital appreciation during the term we hold the property. A buy to let investment will also usually be sold at the end of a planned period of time, and hopefully for a profit, but under the buy to sell strategy the term of holding will be much shorter.
Because of the dozens of heavily discounted properties, many buy to sell investors may bet on the established markets. It all comes down to faith in the recovery. Prices in the likes of Spain and the US will scarcely ever be lower in real terms, if you belief that the recovery will come on strong some time in the next 5-10 years then buy now, as that recovery will bring exceptional capital gains on your investment. But even then you have to sell it on, so choosing a place where demand is expected to strengthen during the recovery and/or to be strong at the time of your planned exit is essential.
This is where Turkey makes a comeback, because as explained above demand for property is continually rising – yes to rent, but the mortgage market is growing at about 20-25 per cent per year, according to the central bank, so buying is growing as well. According to the Reidin/GYODER index Turkish property prices are growing at around 10% per year, so the gains may not be as spectacular as the potential gains from bargain properties in the US or Spain, but the exit strategy is perhaps more reliable and/or easier to plan.
In truth there is room for appreciation in all locations, research will tell you where you can make the most profit based on your investment requirements.
Holiday Home Investments
When it comes to holiday home investment, potential returns is not always the only determinant factor. In fact, it depends on what the investors wants from their investment; are they buying a holiday home first and an investment second or vice versa.
In the first case the location chosen by the buyer will be determined by where they love to holiday, with rental potential only a secondary consideration, whereas in the second rental potential will determine the choice of location.
For obvious reasons we will cover the dedicated investor for whom self-use is a secondary bonus. Spain is a top runner on this front, as it is still the biggest holiday destination in Europe, and third in the world. Having said that, the opportunities for private investors to capitalise on Spanish rental demand are fairly limited, while in Turkey the tourism market is young and growing, and private rental accommodation is growing as a part of it. This means that demand for private rented accommodation in Turkey’s tourism hotspots is growing rapidly, which is good news for investors. Again it is about researching supply and demand, because only you can choose the right investment for you.