Property investment company Colordarcy highlight the latest research from Gyoder, which shows that once again property prices were on the rise Istanbul in 2012.
One of the key drivers for the boom was the Turkish government’s decision to open up the market for foreigners in 2012 by changing the rules on reciprocity which enabled people from more countries to invest.
(PRWEB UK) 27 February 2013
However, there have also been some significant changes to the rules on tax and foreign investment in the past 12 months which may have an impact on prices in 2013 according to the firm according to Colordarcy.
Median property prices in Istanbul have risen from $771.30 sqm to $942.6 sqm according to Gyoder research highlighted by Colordarcy.
Loxley McKenzie Managing Director of Colordarcy commented, “One of the key drivers for the boom was the Turkish government’s decision to open up the market for foreigners in 2012 by changing the rules on reciprocity which enabled people from more countries to invest.”
Colordarcy are keen to point out that prices kept on climbing despite a GDP slowdown in 2012 (Source: Turkstat) which put the brakes on the rapid economy growth of 2011. Even so, GDP still grew by more than 3% according to the latest forecasts.
So what can investors expect to see happening in the Istanbul property market in 2013?
One of the biggest factors this year will be the new 18% tax rate on properties of less than 150 sqm. The Turkish government has now decided to up the rate of tax on smaller properties. The sizes most investors are interested in.
A report by Gyoder says that construction has slowed due to uncertainty about VAT or KDV as it is called in Turkey. If it does apply to the majority of properties in places where land values are high, there is a good chance that it will have a big impact.
Prices could increase by 18% as a result of this alone and the resulting slowdown in construction can only be a good thing for investors nervous about oversupply.
However, according to Istanbul property experts at Colordarcy, it may not be as simple as saying the tax increase will be on all properties less than 150 sqm. It is more likely to affect new developments in the centre of the city where competition for land has driven up prices.
Even then, it may not apply to central locations where there is a regeneration project. This explains the slowdown in construction as developers take a step back.
The short-term affect of the tax increase is one thing, looking at the longer term in Istanbul, local affordability is likely to improve to a level where a typical family living in Istanbul will be able to afford the mortgage payments on properties.
This will be the tipping point where it becomes more attractive for local buyers to invest in affordable properties rather than rent. This point is yet to be reached in Istanbul, which is why rental yields are still among the best investors will find anywhere in Europe according to analysts at Colordarcy.
There are, however, signs of a steady upward trend in affordability. As Istanbul’s population increases and this is a certainty, consider that the population of the city has risen from three million to 15 million in the last 40 years, then we will inevitably see demand for property naturally increase to satisfy the youthful population.
Turkey’s Fitch rating improved to an investable grade in 2012 and this could end up making finance to buy property cheaper. The annual growth rate in housing loans increased by 11% in Turkey 2012 and even a modest lowering of interest rates could mean that typical families are able to buy rather than rent in some less expensive areas of Istanbul.
It is not a case of if but when incomes rise high enough in Turkey as the economy continues to grow.
Colordarcy forecast that there will be changes happening in the Istanbul property market in 2013. Key-ready apartments are likely to attract more attention from investors than buying off-plan as most investors hope to avoid the hike in tax passed on by developers.
Either way, there is nothing to suggest that the breaks are on or that investors won’t be seeing more of the same combination of high capital growth and strong rental yields in Istanbul again this year.
Notes to the editor:
Colordarcy is a leading property investment company that specialises in finding positive cash flow investment properties worldwide. Colordarcy investment property portfolio includes some of the best properties for sale in Brazil, Florida, Turkey and the United Kingdom.
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