New research from Cater Allen Private Bank, part of Banco Santander, found that over three million Britains are likely to buy a property overseas within the next two years as economic conditions in the UK deteriorate.
"The weakening pound has made the Euro-zone comparatively expensive for British investors; while falling prices, over-development and poor economic growth prospects in key European countries are encouraging investors to look further afield to emerging markets such as Turkey," explains Dominic Whiting, editor of the Buying in Turkey Guide.
In contrast to the gloomy outlook in the US and much of Europe, the Turkish real estate sector is expanding due to a rapidly growing population and sustained economic growth, with Deutsche Bank predicting 5-6% real growth per annum over the next 10-15 years. A recent survey of leading investors by Pricewaterhouse Cooper and the Urban Land Institute gave the Turkish metropolis of Istanbul, along with Moscow, the highest "buy" rating of any European city, with Turkey seen as "a market offering phenomenal prospects".
This potential encouraged $2.9 billion of foreign investment last year with this figure expected to increase significantly in 2008, despite the current global financial difficulties. Indeed analysts at the US investment bank Merrill Lynch, recently taken over by Bank of America, have concluded that the Turkish market offers a 'safe haven' during the global financial turmoil, with the company planning a second country-specific property fund to join a $1 billion real estate fund launched 18 months ago.
Due to tight regulations in the country's recently reformed financial system, Turkish banks' direct exposure to the on-going sub-prime mortgage debacle is minimal. Despite the introduction of mortgages in 2007, the majority of Turkish buyers still rely on savings for property purchases due to high domestic interest rates.
The country's flag-carrier Turkish Airlines is also bucking the global trend having enjoyed 20 percent annual growth over the past five years despite the worsening outlook of the sector. The company aims to keep up the pace in 2008 with passenger numbers for January-August up 15% on the same period last year. Meanwhile, low-cost operator easyJet was one of several airlines to announce new routes from the UK in 2008, improving air access to Turkey and helping promote tourism and the property market in the coastal tourist resorts, where the majority of the 23,000 British property buyers are concentrated.
The country's tourist industry is currently one of the fastest growing in the world with officials expecting 24 million visitors in 2008, up 14% on the previous year, while figures from the Turkish Tourist Office and the Association of British Travel Agents show that Turkey was the most popular destination for British holidaymakers this summer, overtaking traditional favourite Spain.
On-going investment in the tourism infrastructure along the Mediterranean coast, with new hotels, marinas, golf courses and airports, is promoting the country as a destination for investors. Prices are still increasing by 10-20% a year in areas such as Dalaman, where a new €100 million Hilton Golf Resort is due to open next year.
"As market conditions deteriorate in the UK, Turkish developers are offering some very attractive deals to tempt British investors," explains Dominic Whiting, editor of the Buying in Turkey guide, "There are some excellent opportunities out there for investors looking for capital growth and income in the form of generous guaranteed rental agreements."
With the credit market tightening in the UK, some developers are subsidising lending rates in Turkey, providing some very favourable mortgage options for British buyers. For example, investors buying on several developments in the popular Mediterranean resort of Side, which is close to a new golf course and offers excellent rental potential, can choose from a series of promotional mortgages from Turkish lender Denizbank, with sterling loans available interest-free for two years or 4.8% fixed for 5 years.
