Istanbul is the biggest city in Turkey, yet contrary to popular belief, it is not the country’s capital, but it is arguably Turkey’s biggest economic powerhouse. It is also showing excellent signs of strong performance as a destination for property investment in 2015.
In particular, three of Istanbul’s streets have recently been singled out in a report by Cushman & Wakefield for their exceptionally strong property performance. Indeed, these streets have reportedly displayed some of the most significant rental growth in the world today. The streets in question are Bagdat Avenue on the Asian side of the city and Istiklal Avenue and Abdi Ipekçi Avenue on the European side. All three ranked in the global top ten streets for rental growth.
In 2014, these streets saw a total of 17,500m2 of real estate rented out. Rents, meanwhile, grew by 24.4% on Bagdat Avenue, 27.3% on Istiklal Avenue, and 20.9% on Abdi Ipekçi Avenue.
The exceptionally strong performance of Istanbul’s property market is down in no small part to tourism, which is boosting the real estate sector more-or-less across the country. Turkey ranks sixth in the list of the world’s most popular destinations for tourists. It is particularly popular with visitors from the UK, Germany and Russia. US citizens also make up a significant and growing portion of Turkish tourist numbers.
Last year, Turkey’s GDP received around €26bn from the flocks of international tourists, which numbered just short of 37 million individuals. This represented year-on-year growth in the tourist sector of 5.5% and this boosted a number of key sections of the Turkish economy, including real estate.
Naturally, those markets that directly accommodate tourists are booming as a result. In particular, the Turkish hotel market is currently showing signs of exceptional health. However, the robust state of the Turkish tourist trade has also boosted businesses and driven increases in employment and earnings, fueling demand for residential properties as well as shorter-term accommodation for tourists.
This has been a key driving force behind growing demand and the rapid growth of rental yields, creating an attractive situation for investors. In the suburbs of Istanbul, a one-bedroom property can currently be purchased for around €50,000 on average, and commands average rents of roughly €300 per calendar month. This represents respectable yields of 7% and that is before the potential for capital growth is considered. Such one-bedroom properties are of particular interest to many investors at present, because there is a short supply of this type of property compared to relatively high levels of demand from young professionals.
As a result, property investors have been keen to take advantage of this situation. Over the course of 2014, there was a 56% increase in foreign investment in Turkish real estate. A particular increase in investment activity came from Middle Eastern investors, but buyers around the world have been taking an interest. Overall, 1.16 million Turkish residences were sold last year to domestic and international buyers – a 2% year-on-year rise in the number of transactions.