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As the demand for housing continues to grow, residential development in Turkey is booming while savvy developers focus on high-end projects that attract foreign investors.

Over the past 10 years, the Turkish residential market has grown significantly, and continues to do so on an annual basis, driven by a continuously expanding population, increasing availability of affordable mortgage loans and rising demand for earthquake resistant buildings.

Demand for housing is especially high in Istanbul, the country’s most densely inhabited city. As a result, house purchase prices throughout Istanbul are following an upward long-term trend, says Colliers International. According to the firm, house purchases peaked in 2013, partly under the impact of falling mortgage interest rates. While house prices in Istanbul fell back 4% in 2014 over the previous year, Turkey as a whole saw an increase of 0.7%.

Continuing major government projects such as the 3rd Bridge, 3rd Airport, Istanbul Financial Centre and the urban regeneration initiative further drive housing development and investment in Istanbul and across Turkey.

According to JLL, Marmaray and other transportation projects are shaping residential sub-markets. “For example, the Sancaktepe residential market has been impacted by the 3rd Bridge connection roads positively, with several large luxury housing projects being developed. Ataşehir has also grown in terms of housing stock, being located in the proximity of both the Bosphorus and FSM bridges. Another case is the increase in housing prices in the Üsküdar and Yenikapı sub-markets after the Marmaray rail project’s opening,” says Avi Alkaş, Country Chairman, JLL Turkey.

Since land in the city centre is scarce, the Istanbul Metropolitan Planning Centre’s regeneration plans aim to shift industrial production to the outskirts of Istanbul in order to develop more recreational and residential areas within the city centre, supported by improved public transport, explains Alkaş.

As a consequence of the shift of housing development back to the city centre, JLL expect the scale of new residential projects to shrink due to the scarcity of large land plots. Furthermore, the trend towards smaller scale projects is further supported by Turkey’s newly introduced Consumer Protection Law, which dictates that the developer must provide equity capital for the entire project, making large scale projects more risky.

Foreign investor interest

In addition to population growth, another important and recently emerging factor affecting residential demand in Turkey is individual investor demand from foreign countries, says Avi Alkaş.

“In order to boost demand, the government abolished the rule of reciprocity in June 2012, which enabled nationals from 42 countries to buy residential property in Turkey,” the JLL expert adds. While Turkey’s residential market has been attracting individual foreign investors since the early 2000s with the restoration of macroeconomic stability, says Alkaş, it was only with the introduction of the new law in 2012 that residential sales to foreigners really started taking off.

“Holiday resorts such as Antalya and Bodrum are the two most popular destinations for residential investment for foreign investors. Istanbul, within this regard, is the only metropolitan city popular with foreign investors in Turkey,” Alkaş says.

Istanbul has been undergoing massive transformation mostly due to increasing density in the city centre and rapid increase in land prices. As a consequence of the high land prices, residential developers largely focus on high-end projects targeting upper middle and top income investors, the JLL expert explains.

“We also see a trend towards luxury residential projects as part of mixed-use developments,” Alkaş says. “This started with the prime areas in the Central Business District and spread to the strategic locations in the non-CBD. Lack of available land for development in Istanbul’s city centre has forced residential developers to shift towards the periphery. The Municipality supports the emerging residential areas with planned transport plans.”

Before mixed-use projects came into play, the residential market was largely dominated by local investors, but the entry of international investors to the residential market set new standards, JLL says.

The mixed-use projects that have emerged over the last five years incorporate residential areas with retail, office, and hotel components. According to JLL, branded residential projects are expected to take the residential market to a new level.

While the retail areas in the branded residential projects “are often designed to answer the needs of the project itself, in some cases these areas are designed as shopping centres targeting outside customers,” says Alkaş. Examples of mixed-use projects with significant retail GLAs include Akasya, Emaar Square, Zorlu Center, and Mall of Istanbul.

Rise of high-end developments

As mentioned above, due to high land prices in Istanbul and in order to meet foreign investor demand, developers in Istanbul and elsewhere are largely focusing on high-end projects.

One such example is the Sea Pearl Istanbul project, jointly developed by Turkish Kuzu Group and Qatari Diar. Located in a prestigious location on the banks of the Marmara Sea close to Istanbul International Airport, the top-end development includes over 1,400 luxurious apartment units, a five-star hotel, high-end boutiques and lavish restaurants. Sea Pearl Istanbul targets international investors, especially from the Gulf region.

Another noteworthy development is the İnistanbul Gala project, a joint project of IS GYO and Nef. Located in Topkapi, one of the most sought after urban districts in the centre of Istanbul, İnistanbul Gala is a mixed-use redevelopment of an industrial site. With over 2,500 housing units, “the project responds to the rising demand for integrated urban living at the heart of a growing metropolis.”

The site plan emphasises shared greenspace by creating a series of outdoor rooms and public plazas. Shared amenities include garden terraces, courtyards, swimming pool, playgrounds, paths, and athletic fields.

With direct connections to tram and metrobus lines, İnistanbul Gala also lies in proximity to central districts including Zincirlikuyu, Çağlayan, Yenikapı, Bakırköy, Ataköy and Atatürk International Airport.

A further major high-end real estate development will be built by IS GYO on nearly 37,000 sqm of land in Istanbul’s Kartal district. The “objective of this urban center is improve the quality of urban life by creating a unique and ecologically advanced 5.5 sq.km area of development in the southeast of Istanbul’s Anatolian side.”

The project will be a mixed-use development containing high-end residential units, offices, retail, recreation and sports facilities and offers views of the Sea of Marmara. The site offers excellent access to auto, rail, water and air transportation while being near to education and research centers, with easy acces to main centers being one of the project’s key features.

However, residential projects targeting middle and lower middle income groups are still in need in Istanbul, says JLL’s Avi Alkaş, adding that some developers have already started to focus on housing projects targeting middle income profile.

Istanbul office market

However, it’s not just the residential sector which is booming in Istanbul. The office market is driven by the continuing government projects such 3rd Bridge, 3rd Airport, Istanbul Financial Centre as well as the urban regeneration initiative.

Istanbul is one of the world’s 20 most expensive office markets, with prime rents of USD 45/sqm per month. Political and economic developments over the past six months have however led to some favourable conditions for tenants.

According to Cushman & Wakefield, Istanbul’s office stock has increased to 4.5 million sqm in 2015 and is expected to further increase to approximately 6 million sqm until the end of 2016.

On the European side, Maslak, Kagithane & Cendere sub-markets have seen a significant increase in supply while the Atasehir sub-market on the Asian side has the highest supply pipeline overall, Cushman & Wakefield says.

According to Togrul Gonden, Atasehir and the Maslak/Cendere sub-markets are expected to be the up and coming areas for development/investment due to availability of land (green/brown field) and proximity to central business and good quality housing areas, which is a key concern in terms of staff travel.

Investment outlook

Whilst the political uncertainty caused by the elections in Turkey has generally impacted on international investor sentiment in Turkey over the past eleven months, this didn’t seem to be the case when it comes to investors from the Gulf region.

“We observed that, since the end of local elections in 2014, Gulf investors were back on the market, with concentration on residential developments either by block acquisitions for investment purposes or unit acquisitions for individual use. On the other hand, the market witnesses partnership establishments in an existing platform where Gulf investors collaborate with local developers,” JLL’s Alkaş explains.

JLL expect that European and U.S. investor interest in Turkey will remain limited in 2015, although the firm believes that prime assets will continue to attract significant interest.

Cityscape Turkey

Cityscape Turkey will take place from 24 – 26 March 2016 at the Istanbul Congress Centre. Cityscape Turkey is the latest addition to Cityscape’s world renowned portfolio of events, and is set to be the meeting place for real estate developers, private and institutional investors, home buyers, architects, consultants and other real estate service providers to network and do business.

Featuring a large scale exhibition, the Cityscape Turkey Awards and other networking functions, Cityscape Turkey will bring together key decision-makers from the public and private sectors, supporting investment, development, bringing transparency and encouraging collaboration.

Following the introduction of the reciprocity law in 2012, Cityscape has welcomed a fast growing number of Turkish real estate developers to its events, in particular to Dubai, Abu Dhabi, Qatar and Kuwait. In 2014, Cityscape Global welcomed over 30 Turkish companies, representing the largest international participation covering 2,500 square meters of exhibition space.


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Cityscape magazine is the Middle East’s leading monthly real estate investment title and is owned and published by Informa Middle East Limited. For more information, please visit www.cityscape.org

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