The Turkish Economy
Prospective Growth
The Turkish economy achieved its highest yearly GNP growth of the last forty years in a year when the inflation fell to a three-decade low. The 9.9%oya growth in GNP was the highest figure scored since 1966. At 9.9% Turkey enjoyed the fastest GNP growth of the last forty years, 2005 GNP growth is projected at 5.5%. Huge domestic market with 70+ million people
Highest population growth in Europe, 1.8% per annum fueling the real estate market Young and dynamic population w/ 70% less than 35 year-old Highly competitive labour force with well-known skills, learning capacity and quality (winner of 1996-97-98 and 2000 European Quality Awards). Convertible currency (Turkish Lira) Tariffs and non-tariff trade barriers lowered to match EU standards Active financial sector (Istanbul Stock Exchange) Ongoing privatization of state-owned enterprises Customs union with EU
Access to Finance
Currently less than 1% of all home purchases are made by mortgage loans, once the mortgage market develops the prices will increase considerably
Political & Economic Stability
Turkey has been officially secular since 1924, although 99% of the population of 70 plus million is Muslim. Most Turkish Muslims belong to the Sunni branch of Islam, but a significant number are Alevi Muslims. Questions of the goals of political Islam and the aftermath of the 1984-99 PKK Kurdish insurgency continue to fuel public debate on several aspects of Turkish society, including the role of religion, the necessity for human rights protections, and the expectation of security. Turkish citizens of Kurdish origin constitute an ethnic and linguistic group. Estimates of their population range up to 12 million.
The Ecevit government, in power from 1999 through 2002, restarted structural reforms in line with ongoing economic programs under the standby agreements signed with the International Monetary Fund (IMF), including passage of social security reform, public finance reform, state banks reform, banking sector reform, increasing transparency in public sector, and also introduction of related legislation to liberalize telecom, and energy markets. Under the IMF program, the government also sought to use exchange rate policies to curb inflation.
Turkey has a number of bilateral investment and tax treaties, including with the United States, that guarantee free repatriation of capital in convertible currencies and eliminate double taxation. Foreign direct investment has totaled only $16,4 billion as of June 30, 2003. Turkey seeks to improve its investment climate and has taken steps to improve its investment climate through administrative streamlining, an end to foreign investment screening, and strengthened intellectual property legislation. However, a number of disputes involving foreign investors in Turkey and certain policies, such as high taxation of cola products and continuing gaps in the intellectual property regime, inhibit investment. The Turkish privatization board is in the process of privatizing a series of state-owned companies, including the state alcohol company and the oil refining parastatal Under its commitments to the World Trade Organization, the Government is liberalizing the telecommunications sector.
EU membership is undeniably beneficial to Turkey, but should come as a second priority. The main priority should be economic reform.
Turkey has made remarkable progress in restoring debt sustainability with high primary surpluses, lower borrowing costs, currency appreciation and high growth which all helped reduce the public net debt to GNP ratio to about 70 per cent at the end of 2003 risk factors remain, albeit to a lesser extent. Any rise in risk premia not only increases the government's current borrowing costs, but immediately reflects on the financing costs of the large stock of liabilities. The latter easily increase or decrease by several percentage points of GNP in response to fluctuations in risk premia. This exposure to market sentiment makes fostering confidence and reducing risk premia particularly important. Indeed, political tension, even that arising from non-economic issues, has a major impact on markets. As a result, maintaining today's welcome political consensus in support of the reform agenda is very important. Improvements in communication policies could in this context play a role, in particular stressing the widely shared commitment to the reform agenda. The recent introduction of a more transparent debt management and reporting system will also contribute to better market information and reduce risk perceptions.
Inflation and Monetary Policy.
In 2003, Turkey's Central Bank finally succeeded in controlling inflationary pressures: as of February 29, 2004 the previous 12-month increase in the CPI had fallen to 27.01%.
Current Turkish policy aims at achieving an average annual GDP growth rate of 4.7% during the Pre-accession Economic Program period (2002-2005). The policy also aims at reducing inflation to 8%.
Foreign & Government Investment
EU membership (prospects)
The Guardian reported in May 8, 2004 "A candidate for European Union Membership (est. by 2015) This situation Greece pledged to support Turkey's quest to join the European Union after groundbreaking talks in Athens yesterday between the Greek prime minister, Costas Karamanlis, and his Turkish counterpart, Recep Erdogan.
Mr Karamanlis, whose New Democracy party won power in March, said he would actively back Ankara's EU aspirations, even if the two countries remained divided over Cyprus and territorial disputes in the Aegean Sea.
"I confirmed the support of the Greek government and me personally for Turkey's course towards Europe and Mr Erdogan's reform programme," said Mr Karamanlis after meeting his guest, the first Turkish leader to visit Greece for 16 years. "
According to The Guardian - 28/07/05
"Our position with regard to the recognition [of Cyprus] will not change until a solution is found" to the 31-year division of Cyprus, Erdogan said Wednesday. He did not specify, however, when exactly the signing of the protocol would take place. Media reports suggested this could happen as early as Friday, or some time next week.
A staunch supporter of Turkey's EU bid, Britain has described the launch of accession talks with Ankara as a key priority of its six-month presidency of the Union."
Although Turkey is experiencing some negative and unhelpful comments from some European leaders with regard to its position on Cyprus, this should not stop progress with Eu Assession and Turkey should continue with progressing its reforms. The EU should not go back on its agreement with Turkey.
FOREIGN RELATIONS
Turkey's primary political, economic, and security ties are with the West
Turkey and the EU formed a customs union beginning January 1, 1996. The agreement covers industrial and processed agricultural goods. Turkey is harmonizing its laws and regulations with EU standards. Turkey adopted the EU's Common External Tariff regime, effectively lowering Turkey's tariffs for third countries, including the United States.
Infrastructure & Transport
Transport. The Turkish Government gives a special priority to major infrastructure projects, especially in the transport sector. The government is planning the construction of new airports, ports, and highways. The government will realize the majority of these projects by utilizing the build-operate-transfer (BOT) model.
The Legal and Tax Environment
A person who has authority to use an item actively or who has the item in his possession is considered to be the owner of that item, even though he may not own it as property. The question of possession arises in connection with personal property and real estate.
Possession constitutes proof of ownership.
If a person possessing something has obtained that possession legally, then he is the owner of that possession. As a general rule movable objects are not registered in official records, with the exception of certain specific things. For example, a car is a movable object and must officially be registered in the traffic records. Real estates are recorded in title-deed registers.
A person may guarantee his own or another person's loan with a piece of real estate. Just as a mortgage may be taken out to guarantee repayment of an existing loan, it may also be taken out to guarantee a possible future one.
The terms of a mortgage are entered on the title deed and represent a limited right over that piece of property. Mortgaged real estate may be sold, but the buyer must accept the terms of the mortgage. A piece of real estate may also be mortgaged more than once. In any case, the order of the mortgage must be registered on the title deed. The subject of mortgaging is governed in general by the Civil Code.
Clear property title with 5 year builders' guarantee.
- 100% foreign ownership permitted
- 100% repatriation of profits and dividends
- 22nd largest economy of the World
Typical Yields and Incomes
Tenant Demand
Modern Turkey spans bustling cosmopolitan centers, pastoral farming villages, barren wastelands, peaceful Aegean coastlines, and steep mountain regions. More than half of Turkey's population of 70 plus million lives in urban areas that juxtapose Western lifestyles with traditional-style mosques and markets.
Typical Yields attainable in Turkey are around 5% to 6% net pa. The season lasts from May to October and some tourists also visit outside this period. There is a shortage of hotel accommodation at present and its difficult to get good accommodation in the high season. It should be remembered that the property prices are still quite low relative to other EU countries see below and the rents come from the International market so yields should hold up for some time.
Length of Season
The Tourist Season lasts from May to October and there are also tourists who visit outside these periods especially in April and November. Also because of the lovely coastal climate many elderly non nationals live there throughout the winter months as has been the custom in Spain in recent years.
Quality of Property/Building Standards
After the 1999 major earthquakes the Turkish Government introduced the Building Control Decree with an implementing regulation, which established specially licensed private inspection companies. In accordance with this decree, all buildings, except for the ones constructed under the State Tender Law, are subject to the control of building inspection companies, which will operate with permission from the High Committee for Building Inspection and will be exclusively engaged in the building inspection business. Whilst building standards have increased dramatically following the Earthquakes of 1999, there is still significant room for improvement throughout Turkey. Along the cost the new homes are being built to a high standard and buyers are usually pleasantly surprised at the high quality finishes.
Tourism
In 2004 17.5 million people visited Turkey 25% increase on the previous year.
21 million tourists expected in 2005, this is a 29% increase, as tourism increases housing prices increase in any market
3-4 hour flight from all over Europe
Seaside properties at 1/4 the price of Spain.
Your Five year Predictions
Turkey chosen as the top real estate development market by Urban Land Institute/Pricewaterhouse Coopers
Prices have increased between 50-80% in the past two years
679,600 new homes needed every year to meet the growing demand
According to all the statistics and no unexpected world depression it would appear that prices should continue to grow at double digit figures for the next five years. Based on the economic growth and the rising tourism as well as the growing demand from abroad for Turkish property I would expect property prices to rise by over 20% in 2005 and by as much for the following two years, thereafter they should be from between 10% and 15%. Add to this the rental yield and you have a first class Investment. There are risks attached of course and these are of a political nature but all the signs are that the Turkish Government are on the right track to maintain progress in this regard.
Prepared by Noreen Hynes
Managing Director Aquarius Properties Abroad Email
noreen@aquariusproperties.com telephone number +35312782900