Why invest in Turkey?
Economic background
Turkey's economy is still largely agricultural - it provides around 35% of the country's jobs - despite now being more of a mix of commerce and modern industry. The economy is largely state-run (most of the basic industry, banking, transport and communication sectors are state-controlled) although private business is quickly catching up. A large proportion of its diverse economy is made up of textiles and clothing, which supplies up to a third of all jobs in industry, although since the end of the global quota system, the sector has suffered against international competitors. Other sectors are growing; Turkey's electronic and automotive industries are rapidly becoming a major part of the country's exports.
Recent developments
Turkey has enjoyed several years of high gross national product(GNP) growth, currently running in excess of 6%, though this is balanced against other years when it has declined sharply. However, following a series of economic reforms, 2004 saw gross domestic product (GDP) at 9%, and growing by around 5% from 2005 - 2006. Inflation in 2005 was at its lowest in 30 years at 7.7%, although it rose again in 2006. It is anticipated that FDI will continue to rise as Turkey continues with its policy of economic reform and in anticipation of its EU membership.Turkey agreed to enter into talks with the EU in October 2005,and from that point FDI into the country began to increase. The Crown Prince of Dubai invested $5 billion into Turkish real estate,reflecting immense confidence in the country's future.
Encouraging investment
The importance of FDI is fundamental to both the country's long-term economic success and its EU membership that it can maintain high levels of inward investment, and Turkey is aiming for $1.2 trillion from the Gulf States initially; the sum committed by the Crown Prince of Dubai was a welcome show of confidence which will hopefully rub off on other potential investors. The Chairman of the Association of Real Estate Investment Companies (GYODER), Bekir Cumurcu, forecast that FDI will reach $30 billion in 2007, up from $20 billion in 2006. Turkey has the potential, given sufficient levels of FDI and membership of the EU, to become a pivotal player in global relations, bridging the Middle East and Europe in both geographic and political terms.
Tourism contribution
The emergence of a strong tourist market has had a significant effect on the country's economy, particularly in the coastal regions of the south where the land once dominated by agriculture now accommodates millions of summer visitors from overseas. In 2005, the revenue Turkey received from tourism grew to over $18 billion, and visitor numbers increased by 20.4%from the previous year to 21 million, making the country one of the world's top ten destinations for overseas visitors. The figures for 2006 show a slight drop in tourist numbers to just below 20 million, which the country's authorities have blamed on a number of factors, including bird flu scares and a series of terrorist attacks on the country.
Making 2007 a good year
However, the Turkish tourism industry refuses to be beaten by one bad year, and factors that are practically impossible to foresee or insure against, such as bird flu and terrorist bombings, must therefore be treated as anomalies. With this in mind, the main players in Turkey's tourism industry and the government came together at a tourism summit in March 2007 to discuss the state of the industry, and it was agreed that efforts would be made to boost future demand, and review why Turkey received less visitors from certain markets, including Britain and Germany, in order to bring these numbers up again in 2007. Furthermore, the Turkish tourism industry has not based its targets and predictions for 2007 on the 2006 figures, but rather on the excellent figures from the previous year, demonstrating an optimism that visitors will choose Turkey in 2007 for the same reasons that they did in 2005. The year has started well, and the first four months of 2007 showed that the number of visitors from the United States had doubled compared to the same period of 2006. This demonstrates the power of promotion; Turkey ran an advertising campaign during the beginning of the year on most major TV channels in the US, as well as in the printed press, to which it attributes this rise in tourism. By the skilful promotion of Turkey in other parts of the world, it is hoped that tourist numbers will get back on track this year.
Encouraging development
As part of its tourism drive, the Turkish government has chosen certain areas to be ‘Tourism Development Areas'; these are the regions thought to have the greatest potential as tourist destinations and so have been chosen by the Ministry of Culture and Tourism. Government-owned land in these regions is promoted for sale to developers, with the knowledge that the government will invest considerable amounts in the future to boost the areas' infrastructure. Property investors will be able to benefit from the scheme as developments in these areas will have good rental potential, and the promise of further investment into infrastructure. Investors should be aware that there are some areas, particularly in the developed tourist regions of the south, where construction has appeared at such a rate - in an attempt to keep up withthe growing demand - that the quality of many developments is not up to standard. However, it lies with the purchaser to be cautious in their choice of agent and developer to protect themselves against this. Unfortunately, there are some areas where investment potential has suffered as a result.
Growing demand
Turkey has a huge population of over 70 million people; 70% are under the age of 30, and the population is growing at around 2% ayear. This means the country has a considerable domestic demand for accommodation, and gives property investors the security of a strong market within the country, both for rental and resale, and ensures against buying into a market driven by investors. Reuters has reported that this young and growing population has created a housing deficit in Turkish cities of around 600,000 residences. The demand for property will also increase as a result of the new mortgage system that Turkey is adopting, making property purchase more accessible by offering flexible interest rates, which in turn is expected to lead to lower interest rates offered by lenders. As the mortgage market continues to open up, there will be agreater demand for property from both the overseas and domestic markets.
Key Areas: Istanbul
Turkey's capital city is gaining a name for itself as a trendy international nightspot, and is attracting an increasingly cosmopolitan crowd. The government is keen to promote the city for investment, and a major urban regeneration project is high on its agenda. The demand for accommodation in Istanbul is considerable; the population is growing at 4% a year (compared to the national average of around 2%) as many residents from rural areas migrate to the cities for work. Istanbul is already home to 20% of Turkey's population, and by 2020 the city's population is predicted to reach 23 million. A housing crisis has been predicted as construction in the city will not be able to keep up with the rising demand, with Turkish residents moving into the city and, increasingly, overseas professionals relocating to Istanbul for work. Demand for new accommodation in the city is driven not just by the property deficit, but also the state of a large proportion of the existing housing in the city, much of which would not meet modern standards for living or for safety. Professional workers will be looking for a high standard of modern, conveniently located accommodation, either to rent or to buy, and property investors can take advantage of this.
Key Areas: Bodrum
Investors preferring to take advantage of the tourism market in Turkey may consider Bodrum, formerly a small fishing port whichhas now turned into one of Turkey's best-known tourist destinations. Its lively nightlife, paired with the attractive coastline of the Bodrum peninsula, guarantees a steady stream of Turkish and foreign tourists every year. It is considered an upmarket town, and investment has been poured into developing the area, including two new marinas, golf courses, and the expansion of Bodrum airport. The town receives a large proportion of all Turkey's annual visitors, and so property in the area is in demand, and accordingly more expensive than that available in other areas of Turkey. However, it is still cheap by International standards, and as well as a growing tourism industry, Bodrum offers international transport links, an expanding expatriate community and the promise of further positive development, with building restrictions ensuring that development remains tasteful.
