15 January 2009

REIDIN.com INDEXFocus Turkey 2008 Real Estate Sector Analysis – Residential


The monthly and yearly earning yields of residential real estates in 6 large cities of Turkey (Adana, Ankara, Bursa, Istanbul, Izmir and Kocaeli) covering the period between January 2008 and December 2008 were calculated by using the “monthly price/square meter median sales and rent values” compiled by REIDIN.COM and weighed according to the populations in these cities.

On yearly basis, the cities ranked according to the nominal earning yields from residential real estate investment from the highest to the lowest as Kocaeli, Istanbul, Adana, Ankara, Bursa and Izmir. Real estate investments in Kocaeli region yielded a nominal earning at the rate of 6.98% in 2008, while the real estate investor in Izmir city had to be contented with a yield of 5.86%.

It is observed that the investments in Istanbul yielded an earning at the rate of 0.54% monthly in average. The monthly earnings in Istanbul are more stable compared with the other cities. In Ankara, the earnings increased during the second half of the year; the most important reason for this is that in Ankara the sale price of the residents increased higher than the monthly rents. In Izmir, the monthly yields fluctuated within a band of 0.45% to 0.50%.

When the residential real estate investments and the financial investment instruments are adjusted by inflation rate according to the Consumer Price Index (CPI), it is seen that the investment instrument having the highest real income is the Gold. When adjusted by inflation rate according to the Consumer Price Index, the real estate investments caused a loss to the investors in real terms in 2008. Accordingly, the rate of loss in real terms is 3.31% in Adana, 3.33% in Ankara, 3.62% in Bursa, 3.06% in Istanbul, 3.82% in Izmir and 2.81% in Kocaeli on yearly basis. When adjusted by inflation rate according to the Consumer Price Index, of the financial investment instruments, the Gold yielded an income in real terms at the rate of 22.54%, the US dollar 19.27%, Euro 11.41% and the Time Deposit 6.39%, while the Istanbul Stock Exchange (ISE-100 Index) posted a loss of 57.80%.

Due to the adverse global economic condition led by the Mortgage Crisis in the USA during the second half of the year, the volume of the mortgage loans has been badly affected. With the increase of the interest rates of the mortgage loan during the second half of 2008, the loans declined dramatically in real terms which led to downward movement of the residential real estate sale prices and rents. The fact that the decline in the sale prices is higher than the rents during the last months of the year has led to higher earning yield in real terms from the residential real estate investments than the change in the mortgage loans in real terms. The decline in inflation rate causes the increases in real terms occurring in November and December.

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