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Strength and continuation of Gulf Real Estate Investments in Turkey will depend on demand intensity, attractiveness, strength of the Turkish economy and governmental actions

Al Mazaya’s Report: Values of long-term investment in the Turkish economy will be separate from current local crises

 

It is almost unlikely that real estate sector will be negatively affected by the accelerating present-day developments in Turkey. Investments in the real estate sector are considered long-term investments, and this is a time when the real estate sector mainly brings positive impacts to many other sectors and the national economy in general. It is well known that real estate investments mainly take the form of long-term investments, whether individual or corporate, and, as such, their positive impacts outweigh the negative, according to this measure.

Market experiences have proven that real estate sector is mainly affected by general financial and economic events and developments rather than immediate and current local events. Hence, investors look for low-risk real estate assets in order to avoid economic pressures and mitigate the impact on both assets and investments, while liquid capitals resort to investing in gold markets, as short-term dissociation is possible. At the current evaluation level, real estate investments are considered safe investments under all circumstances, and prices of real estate assets mainly mark tangible rises amidst wars and unstable circumstances, a matter which ensures the continuation of real estate investments at the local and global levels. This is based on the premise that the real estate market has become global and all individuals can own and invest in it wherever they are based.

 

Al Mazaya Holding’s Weekly Real Estate Report points out that foreign real estate investments in Turkey began individually, and then expended to become corporate at the regional and global level. Real estate investment in the Turkish market began to take the form of long-term corporate investment, at a time of increasing demand by individuals to own villas and residential villas for investment or residential purpose, a matter which has motivated many international real estate companies to look towards the Turkish real estate market.

Moreover, the developments of real estate investment laws and facilities related to entry and exit of capitals of both individuals and organizations have direct impact in raising the pace of activity, and it has become likely that these laws and legislations will not be impacted by political developments within the Country and government bodies. Rather, these developments may play a positive role in focusing on foreign investments and attracting more of them to mitigate the negative impact of the coup on the investment move as well as capital flow in the long run. This takes into consideration the fact that individual investment’s attractiveness is still at normal levels and price indicators reflect the difficulty of occurrence of recessions in prevailing prices, given market solidity and continued investment attractiveness.

Furthermore, during the first half of the current year, data from the Turkish real estate market reflected a rise in demand indicators by nationals from the Arab States, while Istanbul retained its position as the region friendliest to foreign investment, followed by Antalya and Burse. Moreover, the demand for purchase of real estate in Ankara and Trabzon marked a remarkable activity, noting here that the ratio of foreigners’ purchase of real estate during the first half decreased by 9% as compared to the market level during the same period of the past year. In this context, it is worth mentioning that the reported pace of activity is parallel to the growth rates achieved by the Turkish economy in 2014, which reached 4%, while the GDP revealed a growth in the Turkish economy in the last quarter of the past year at a rate of 5.7%. Furthermore, the demand for the real estate market went up by 4.7%, and the reported rise rates of sales in real estate in the past year reached 10%. Moreover, investments from Arab nationals account for considerable economic wealth in the Turkish real estate sector and the economy in general.

Al-Mazaya’s report points out that the Turkish economic sector has been negatively impacted by the challenges it has faced and is still facing since the past year. The intensity of the challenges has become stronger and its impacts have maximized in conjunction with the rise in crises in the region and renewal of military operations and the series of explosions that broke out in major cities – especially in Ankara and Istanbul. Market indicators point out that the Turkish market will be affected by the latest events, but will remain solid due to government actions. Internal struggles will not affect the investment attractiveness in the long run, while all indicators reveal that the Turkish economy is still good and has not marked any shakes or recessions due to the unsuccessful coup attempt over the past month, thanks to awareness and perception shown by the Turkish people in protecting the banking sector since the very beginning of coup up to the present moment. Al-Mazaya’s report further points out that the rapid actions taken by the Turkish government to mitigate financial and economic consequences had positive impacts in reassuring investors, particularly Gulf investors, that the government wants to ensure the stability of foreign investments.

Moreover, Al-Mazaya’s report asserted that real estate investment and asset value would be stable, while the tourism sector would be the largest loser as a result of recent developments in the political arena in Turkey that have not yet ended. Market indicators suggest that the tourism sector would face further pressures and challenges after it has undergone successive conflict, starting from the attack on airports and ending with the coup attempt. It is necessary to emphasize here that the tourism sector is considered an important pillar for the Turkish economy, and one of the most importance sources of major foreign currency flow. Hence, the decline in the number of tourists will have negative impact on several economic sectors that are directly and indirectly related to tourism sector, since the tourists in general, and Arab tourists in particular, often turn into investors and buyers of real estate following their first visit. It has become certain that the number of tourists coming to Turkey will go down at a rate that may exceed 2% during the current year, as political developments have occurred amidst summer season, which often marks the peak season for Arab and Gulf tourists to spend their holidays. Accordingly, efforts to attract tourists over the remaining period of the season may probably prove ineffective and unsuccessful.

Al-Mazaya’s report also maintains that gulf real estate investments in Turkey will depend on their strength, continuation and stable prices, on demand strength, attractiveness, strength of the Turkish economy and governmental actions. This indicates that further solidity is needed to minimize any consequences that may arise, since the priorities of the Turkish government include, among others, is undertaking all actions which help maintain the pace of gulf and global investment. It is worth mentioning here that gulf investments vary between real estate investment of individuals and companies as well as investments in the banking sector, tourism and health sectors, which are safe sectors and show solidity indicators. Thus, there is no risk to existing investments, while the responsibility of the Turkish government will include maintaining the pace of trade exchange with the GCC States. The Turkish economy will also try to mitigate the severity of internal turmoil through further partnerships and business deals with foreign entities.

Al-Mazaya’s report asserts that the major challenge facing the Turkish State is its ability to keep offering further investment opportunities at the individual and company level. This will help attract foreign investments over the upcoming period with the current level of instability and the difficult evaluation of the situation over the short upcoming period.

Al-Mazaya’s report emphasizes that the growth and continuation of investments require the presence of a stable economy as well as stable political circumstances, which currently falls on the shoulders of the Turkish economy and those in charge of it. In this context, Al-Mazaya’s report addressed the potentiality of Turkish economy to avail itself of the Brexit decision, as the British metropolis holds the first rank worldwide in absorbing global capitals, thus the potential of maintaining such ranks has become uneasy following the Brexit decision. Thus, many metropolises will seek to attain that advanced position, and, as such, Istanbul’s change is enhanced in this respect, depending on the developed infrastructure it owns as well as financial and economic legislation which go in line with the requirements of occupying such position – these should also be compatible with international standards.

Al-Mazaya’s report also emphasized that risks surrounding long-term investments in the Turkish economy are low, and that liquid as well as short-term investments would be affected by the developments taking place at the political and economic arena in the present time, until their negative impacts come to an end. Al-Mazaya’s report further stresses the importance of the existence of an all-inclusive, solid financial sector over the coming period, given the associated indicators it brings to stability and growth for the remaining sectors and the improvement of investment opportunities.