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| The Real Estate Sector in Turkey |
i. General Profile
The real estate sector in Turkey has entered a new development era. This new era has different characteristics; while the sector increasingly adopts a real estate sector understanding at international norms, this development is also reflected on housing and other sub-groups, the need to form regular markets is increasing, an efficient financing system is being established, institutionalization is increasing, the interest and participation of foreigners is expanding, and increasingly becoming appealing in the international arena.
In the new era, the real estate sector in Turkey will become more affected by the developments in the global real estate sector. The demand for real estate expanded and prices increased at the end of the rapid worldwide regression of interest rates after the 1997 Asia-Pacific economic crisis. While a significant repletion is being experienced in the European real estate sector after 2005, in the US markets, repletion is neared. The Asian markets are the most developed markets with a potential to develop. Turkey is also becoming increasingly appealing within the developing markets developing within this context. Thus, in the ULI/PWC institutions 2005 developing real estate markets report, Ä°stanbul is in the first position in the probability of development rating amongst 27 metropolitan cities excluding risks.
Turkey’s full membership process to the European Union will also impact the real estate sector positively. Elements such as dematerialization, transparency, auditing, high quality and standards, institutionalization, statistical information will increase in the sector with the impact of the process. Foreign actors will create competition through showing activity in the sector, purchases and mergers will be experienced. Foreign capital investments will expand during the full membership process like it happened in other countries.
Economic developments present great significance in terms of the future of the real estate sector. The economic improvement in the development of the sector, the stability of the value of YTL and inflation, and especially reaching international norms in interest rates will accelerate the development in the sector. The sector will experience a fast, stable, and foreseeable development. The developments that will take place in Ä°stanbul within the next ten years are also important in terms of the development of the real estate sector. The Ä°stanbul service sector will show a focused growth and development.
In the mid-long term, the industry within the city will move outside the city. While other qualified sectors continue to increase the need for workforce, the capacity to create employment for unqualified workforce will decrease.
ii. Economic Profile
The real estate sector in our country has realized major growth in the last 25 years in parallel with the application of the free economy model. This trend has led foreign capital companies to enter the market, and to the increased demand of consumers for higher quality offices, hotels, and retail sale venues that are consistent with western standards. Furthermore, the rapid increase of the population, migration to the city has also increased the demand for real estate.
The real estate sector has experienced a serious drop in both new projects and new demands due to the Russian crisis in 1998, the Marmara earthquake in 1999, and the banking crisis in 2000-2001. After the economic crisis in November, 2000 monthly housing loan interest rates from 2,5-3,0% to 6-7%, and the chance to become a home owner with a bank loan has decreased. In addition, the investments financed by domestic and foreign investors also stopped.
In 2002, the construction sector shrinked by 5% against the 7,8% growth of the economy in the same period. In 2003, the sector shrinked by 9% despite the growth of the economy, and its contribution to GNP decreased from 5.9% in 1997 to 3.5% in 2003. The government expenditure limited with the IMF program, and the postponed investments have become the main obstacles standing before the growth of the construction sector, and the sector could only grow starting from 2004; 4.6% (2004), and 21.5% (2005). With a growth of 19.7% in the first half of 2006, the sector increased its contribution to GNP from 3.8% in 2004 to 4.5% in 2003.
The real estate sector has shown growth parallel to the construction sector, and in relation to the decreased inflation and interest rates, a demand population was experienced in the sector in 2004 and 2005. The total home loans reached 12 billion YTL in December 2005 and 21.7 billion YTL in June 2006. However, despite the serious increase in home loans, the rate of loans to GNP is around 4%, and this rate is very low when compared to developed countries. For example, the rate is 40% in the UN, and 53% in the US. The economical potential in the real estate sector should also be backed by demographic factors. The population of our country is expected to reach 77 million in 2010. In the case the population continues to grow 1.3% annually, at least 300,000 houses need to be built per year. However, the definite number is expected to increase with the demand for luxury housing which is expected to increase in parallel to the national income per person. Also, our country’s young population is supporting the potential for development. 63% of the population of 70 million is aged less than 35 years. In the last 14 years, the ratio of those aged 15-64 to the population has increased from 61% to 64%.
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General Assembly Information
