Despite a turbulent six months which has seen Turkey endure a number of terrorist attacks, a military coup attempt and the imposition of sanctions by Russia, the country’s private real estate market and economy are showing “extreme resilience,” according to experts.
The failed coup d’état, which happened on July 15, triggered worldwide concern about the stability of a country that many believe will be key to Europe’s future trade relationships with Asia and the Middle East.
Frank RoccoGrande, partner at Istanbul-based private real estate firm BLG Capital, has been based in the Turkish capital since before the global financial crisis. He believes it is difficult to pinpoint exactly how much damage the attempted military coup actually caused to the real estate market.
“Foreign investor sentiment was already cautious towards Turkey because of the multiple terrorist events over the last 12 months. The time between the Ataturk airport terrorist attack and the attempted military coup was approximately three weeks so it’s very hard to tease out precisely what impact the attempted military coup had on real estate,” said RoccoGrande.
“So what has happened since then? The Turkish government has issued a state of emergency and it has worked very hard to let the markets know that Turkey is a safe place for foreign investors,” he added. “As a manager of foreign institutional capital, I am pleased with what the government is doing. I live in Istanbul and day to day life hasn’t changed, it is business as usual.”
Despite the country’s problems, there are positives, according to Roccogrande. Turkey’s gross domestic product is still forecasted to grow by 3.3 percent for 2016, according to the OECD, which is ahead of most European countries. The original GDP projection for 2016, prior to the attempted coup and attacks, was 4 percent. But, he added, economists have predicted an increase in GDP growth of between 3.5 percent and 4 percent for 2017.
RoccoGrande believes the country’s real estate market, which has historically been dominated by domestic investors that have lived through several coups, still has many positive aspects which have already attracted some big names.
“The geopolitical situation means domestic Turkish investors have paused and possibly retracted a little,” he said. “This opens up opportunities for patient long-term capital investors that want to come in at a good point in the cycle, such as private equity players like ourselves or sovereign wealth funds like GIC. Blackstone has also made major acquisitions in the Turkish market in recent years,” he added.
Henry Morris, managing director and head of Europe at Denver-based private real estate firm Amstar, which has invested in Turkey, suggests the country’s entrepreneurial spirit and resilience as well as its population demographics are helping to drive the economy.
“A lot of things that people read are on the macro level, which understandably would give people concerns, but from an operational point of view, people still need to go out and buy products and Turks are entrepreneurial people and they like to spend their disposable income, so these factors work well for consumer-led sectors like retail and residential,” added Morris.
“Speaking purely about demographics, about half the population is under the age of 32,” he added. “There are some very big cities where Amstar has the only shopping center, and these centers are full. Despite the country’s challenges, turnover and footfall continue to increase.”
The executive said that Turkey has long-term demographic benefits, a globally strategic location, and a sizable and hard working population, which all lead it to be a resilient economy with continued GDP growth projected this year.
“When you put all these together, it creates economic growth and the government, whatever you think of them, spends a huge amount money on infrastructure, such as the new airport, which will be one of the largest in the world.”
A report by UK property firm Knight Frank has suggested that while there might be a short-term hit for the Turkish economy following the failed coup, the underlying market fundamentals of strong demand set against low supply mean the country’s long-term outlook remains positive.