Many had hoped that Turkey would be immune from the financial crisis, because Erdogan's AK Party had displayed excellent governance since taking power; paying down debts while other countries ran them up and making sweeping reforms to the banking system (similar to what many countries did after the financial crisis), increasing reserve limits and other measures. But alas, Turkey, like so many other hopefully immune countries fell into a year long recession in the final quarter of 2008.
However, the banking reforms and solid fiscal management allowed Turkey to absorb the recession and bounce back very forcefully indeed. Ending the recession with a 6.4% GDP growth in Q4 2009, Turkey's economy went on to become one of the fastest growing economies in the world over the next 2 years, and the fastest growing economy in Europe in 2010.
Growth has slowed this year, but far from a harsh pop as some predicted, the slowdown has followed the path laid out by the government, which said it intended for growth to slow as it shored up the progress made over the last 2 years.
In fact the government's prediction of around a 4% growth rate is almost exactly what we are seeing so far. Unemployment at 8.2% is the lowest it has been for years and even the current-account deficit -- the one economic metric that Turkey just couldn't turn in the right direction -- is now closing.
The real estate market has been one of the highlights of Turkey's economic prowess, with strong demand across all sectors, strong construction figures, growing rents, growing yields and rising prices. Looking at the price growth, we see it consistently remaining at around 10-11 percent per annum in each monthly index for almost the last two years. This slow and steady growth is exactly what investors are looking for in today's bubble-over-cautious world. Perhaps this is why foreign purchases of Turkish property grew by 40% in 2010. Now of course, that number is set to go through the roof, because the Turkish property market just got a whole lot more accessible.
The New Law Increases Accessibility to Property
Most of you will have heard of the reciprocity clause in Turkish property law, if not before then certainly now because of the big industry splash caused when Turkey passed a law ending it. Under the reciprocity law, only nationals of countries where Turks could buy property, could buy property in Turkey. In May Turkey passed a law ending reciprocity, but this didn't automatically mean all nationalities could buy in Turkey, rather the government had to publish a new list of countries that would now be allowed to buy.
The law came into effect with the new list in place on August 6th, the list which took the number of nationalities that could buy property in Turkey from 89 to 193. To get an idea of how much difference this new law could make to the property market we need look no further than foreign sales figures for May. Before a single new nationality was allowed to buy property in Turkey, foreigners purchased $1.1 billion worth of property in the country, which is more than 4 times the amount purchased in all of 2011. It is thought the increase in sales was due to foreigners purchasing in order to resell after the new law came into effect.
The wealthy Arab states, previously banned from buying property in Turkey because of reciprocity, are expected to bring the most new money into the Turkish property market, with $2 billion per year being a widely accepted figure. It is a fact that Arabs prefer to holiday and invest in other Arab or Muslim countries. The Arab spring severely depleted the list of Arab and Muslim countries safe to holiday or invest in, and therein massive increased Arab tourism to Turkey. The fact that Turkey had just agreed visa-free deals with many Arab states was a help, and at the same time Turkey standing up to Israel also increased its popularity in the Arab world.
Article written by Liam Bailey on behalf of Wise Move Homes, a Turkish real estate developer currently focused on the Altinkum property market.