The Turkish market has undergone a major transformation in the past decade, according to Herman Kok, international research director at Multi Corporation. ‘Turkey used to be a hyper-inflationary economy and highly volatile. But it has left that phase behind it in the past 10 years. Since 2002, the government has created a stable platform for the economy,’ he said.
Kok made the comments at the PropertyEU Turkey Investment Briefing hosted last week in London by Aberdeen Asset Management where a panel of experts discussed prospects for foreign investment in the property sector. The restructuring that the government has pursued since 2002 has also helped address the country’s high inflation rate and high debt levels, Kok said. While inflation has averaged at around 8% in recent years, it is forecast to decline further to just under 5% by 2016.
The government has done a good job to keep the budget under control, Kok added, pointing out that public sector debt was now 40% of GDP compared to 100% previously. This is significantly lower than even Germany and France (80% in 2011). ‘Turkey has experienced an enormous transformation in the last 10 to 15 years,’ Kok said.
On a negative note, the current account deficit is still very high at 10% which is even higher than for Greece. But foreign investment to markets in the Middle East and Russia as well as Europe is growing, Kok continued. ‘Since the 2008 global crisis, Turkey’s position overall has been favourable thanks to its sound macro-economics and solid banking system.’
Another major shift that has taken place in the past decade relates to the changing structure of the lower and middle classes. ‘Lower income households are shifting to middle class ranks and the middle classes are moving up to the upper middle class ranks. As a result, more locations in a city are becoming relevant for consumption in places like Istanbul and Marmara.’ The growth in spending power is not confined to the big cities, Kok added. ‘Anatolia is becoming more colourful in that sense and is starting to get its own economic dynamics as income levels per capita are rising. Parts of Turkey have already reached the levels of Central Europe and they are still maturing.’
In another sign that the Turkish property market is coming of age, a series of laws has been passed in 2012 that will create a better environment for investment, noted Barlas Balcioglu, partner and head of Istanbul real estate at Salans. ‘Market players can bring about change and influence the government on the legal and regulatory side. We have an investor-friendly government that is trying to do everything that is good for the economy.’
The government is engaging with various organisations like ULI and Gyoder to discuss regulations and their potential impact on the market, Kok confirmed. ‘What we’re seeing is an evolution. The institutional framework is still underway but there is a growing relationship between the market or tenants and the public sector. The direction is pretty stable.’