Property in Turkey is more popular than ever in the world of overseas property. Before the credit crunch Turkey was a popular and growing tourist destination, and very popular with holiday home buyers. But at the time, the focus was on the investment benefits of overseas property, and, in this regard, Turkey had one problem.

In every article that covered Turkish property as an investment, in would creep a mention of EU accession. EU accession was a proven growth catalyst; we had all seen property prices in Estonia and Poland grow rapidly as they progressed on the path to EU membership, and then after they joined. Turkey has been an EU candidate since 2005, but unofficial vetoes from France and Germany and opposition from others form a huge and sometimes seemingly insurmountable obstacle.

Now there has been somewhat of a role reversal; the EU is embroiled in a massive sovereign debt debacle and struggling with sluggish growth in a slow and painful recovery from recession. Meanwhile Turkey has emerged from recession with aggression and vigour to become one of the fastest growing economies in the world. Turkey is now a popular choice with investors as well as holiday home buyers, here are some of the reasons why post-crash Turkey is such hot news.

Years of Reform Paying Off

Turkey has been reforming almost constantly since the coup in 1980. However, the reforms accelerated when the currently ruling AK party took over. At the time, Turkey was still reeling from a financial crisis. The AK party started with major reforms to the banking system, similar to those made in the west after the recent credit crunch. Because of this, and the immature mortgage market, the Turkish banking system was barely affected by the international financial crisis.

Thus, while most of the world was suffering from constrained credit and liquidity at catastrophic lows, liquidity remained high in Turkey. The continuance of free flowing credit is thought to be one of the main reasons why the Turkish economy has recovered so strongly.

Other reforms by the AK party include opening up the property market to foreigners, and to gradually remove the military from Turkish governance. It has also been responsible for completely turning the Turkish economy around, from a volatile and vulnerable mess of high inflation, to a stable, sound and strong economy. The main achievements include:

• Increasing Central Bank reserves from $26.5 billion to $72.5 billion
• Reducing public debt from 74% of GDP to 39% of GDP
• Reducing inflation from 34.9% to 5.7% the lowest level in 39 years.

Low Interest Rates

You are forgiven for thinking, wow, rates are low everywhere. You are right, but in Turkey the low rates are not simply a knee jerk reaction to the financial crisis. While the crisis was undoubtedly a catalyst for reducing rates, the move is also a response to falling inflation over the long term. Thus, there isn’t the same urgency or volatility, and there is less chance that the rates will be jerked back up just as quickly.

When you add low interest rates to high liquidity you get great deals on readily available mortgage finance.

The Star of Europe

This was pretty well covered in the intro, but basically the credit crunch has done Turkey two favours: one, removed EU accession as a downside from investment considerations, and made Turkey the best country in Europe to invest in.

The Turkish economy grew 11.7% year on year in Q1, and 10.3% year on year in Q2 according to Turkstat. Meanwhile the European Union grew 0.7% year on year in Q1, and 2% year on year in Q2, and Slovakia (the fastest growing country in the EU) grew 4.7% and 5% respectively. On top of that, Greece, Spain and Italy are all embroiled in sovereign debt crises, and (with the exception of Greece which is still contracting) are only just emerging from recession.

Thus, Turkey with its stable banking system, respectable debt levels, manageable deficit and rapid growth is standing out as the best investment in Europe, and one of the best in the world.

New Positivity adds to Old Strengths

On top of the benefits from the new reality, Turkey still has all the strengths that benefited it during the boom, namely low property prices and rapid tourism growth.

According to the recent Turkey Datafile by Overseas Property Professional Turkish visitor numbers increased from 24 million to 30 million between 2005 and 2008, although other reports put the 2008 figure at 28million. The OPP report reads:

“In 2005, there were 24,124,501 visitors to the country, who contributed $18.2 billion to Turkey’s revenues, with an average expenditure of $679 per tourist. In 2008, the number of visitors rose to 30,929,192, who contributed $21.9 billion to Turkey’s revenues.”

The OPP report also puts the average price of holiday homes in Turkey at 40,000 EUR and average rental yields at 5-10% gross.

With great beaches, a developing tourist infrastructure, increasing accessibility, low property prices, low interest rates and high liquidity, property in Turkey currently has a very powerful investment package, the credit crunch has only served to highlight much of what was already there.

Source : Spot Blue