MAJOR GROWTH FOR TURKISH RESIDENTIAL
As the demand for housing continues to grow, residential development in Turkey is booming while savvy developers focus on high-end projects that attract foreign investors.
Over the past 10 years, the Turkish residential market has grown significantly, and continues to do so on an annual basis, driven by a continuously expanding population, increasing availability of affordable mortgage loans and rising demand for earthquake resistant buildings.
Demand for housing is especially high in Istanbul, the country’s most densely inhabited city. As a result, house purchase prices throughout Istanbul are following an upward long-term trend, says Colliers International. According to the firm, house purchases peaked in 2013, partly under the impact of falling mortgage interest rates. While house prices in Istanbul fell back 4% in 2014 over the previous year, Turkey as a whole saw an increase of 0.7%.
Continuing major government projects such as the 3rd Bridge, 3rd Airport, Istanbul Financial Centre and the urban regeneration initiative further drive housing development and investment in Istanbul and across Turkey.
According to JLL, Marmaray and other transportation projects are shaping residential sub-markets. “For example, the Sancaktepe residential market has been impacted by the 3rd Bridge connection roads positively, with several large luxury housing projects being developed. Ataşehir has also grown in terms of housing stock, being located in the proximity of both the Bosphorus and FSM bridges. Another case is the increase in housing prices in the Üsküdar and Yenikapı sub-markets after the Marmaray rail project’s opening,” says Avi Alkaş, Country Chairman, JLL Turkey.
Since land in the city centre is scarce, the Istanbul Metropolitan Planning Centre’s regeneration plans aim to shift industrial production to the outskirts of Istanbul in order to develop more recreational and residential areas within the city centre, supported by improved public transport, explains Alkaş.
As a consequence of the shift of housing development back to the city centre, JLL expect the scale of new residential projects to shrink due to the scarcity of large land plots. Furthermore, the trend towards smaller scale projects is further supported by Turkey’s newly introduced Consumer Protection Law, which dictates that the developer must provide equity capital for the entire project, making large scale projects more risky.
Foreign investor interest
In addition to population growth, another important and recently emerging factor affecting residential demand in Turkey is individual investor demand from foreign countries, says Avi Alkaş.
“In order to boost demand, the government abolished the rule of reciprocity in June 2012, which enabled nationals from 42 countries to buy residential property in Turkey,” the JLL expert adds. While Turkey’s residential market has been attracting individual foreign investors since the early 2000s with the restoration of macroeconomic stability, says Alkaş, it was only with the introduction of the new law in 2012 that residential sales to foreigners really started taking off.
“Holiday resorts such as Antalya and Bodrum are the two most popular destinations for residential investment for foreign investors. Istanbul, within this regard, is the only metropolitan city popular with foreign investors in Turkey,” Alkaş says.
Istanbul has been undergoing massive transformation mostly due to increasing density in the city centre and rapid increase in land prices. As a consequence of the high land prices, residential developers largely focus on high-end projects targeting upper middle and top income investors, the JLL expert explains.
“We also see a trend towards luxury residential projects as part of mixed-use developments,” Alkaş says. “This started with the prime areas in the Central Business District and spread to the strategic locations in the non-CBD. Lack of available land for development in Istanbul’s city centre has forced residential developers to shift towards the periphery. The Municipality supports the emerging residential areas with planned transport plans.”
Before mixed-use projects came into play, the residential market was largely dominated by local investors, but the entry of international investors to the residential market set new standards, JLL says.
The mixed-use projects that have emerged over the last five years incorporate residential areas with retail, office, and hotel components. According to JLL, branded residential projects are expected to take the residential market to a new level.
While the retail areas in the branded residential projects “are often designed to answer the needs of the project itself, in some cases these areas are designed as shopping centres targeting outside customers,” says Alkaş. Examples of mixed-use projects with significant retail GLAs include Akasya, Emaar Square, Zorlu Center, and Mall of Istanbul.
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