The Istanbul property market, specifically low to middle income housing has been on my radar for some time now. There is a distinct lack of housing for the growing population, and, as we are all well aware, when demand for a certain type and location of property is high and supply is limited, then we see that type and location of property go up in value, and therefore provide us with our capital profits as property investors.
Firstly, Istanbul property is in hot demand with the domestic market in Turkey. Up until spring 2006, the only way for a Turkish citizen to buy their own home was to use cash, i.e. savings, inheritance or a 5 year personal loan. The absence of mortgage finance in Turkey has kept the price of property very low, due to the lack of purchasing power of the property investor or home buyer.
The introduction of mortgage finance in 2006 meant that the entire population could, for the first time, buy their own home. So let's look at the level of demand, how many of these nationals are there?
Well in Istanbul there are approximately 12,500,000 inhabitants (according to the national census in Jan 2008). This population is growing at a rate of 3.3% year on year, mostly due to people from all over Turkey moving to Istanbul to take advantage of the high employment levels.
There are currently approximately 3,300,000 properties in Istanbul for residential use, assuming that one in ten properties is not inhabited, that means there are around 4 people to every property, indicating a distinct need for more good quality housing near employment centres.
Couple this with the organic population growth bringing in a further 400,000 new residents each year, then we can clearly see that an investment in a good quality new-build development in the right location has the potential to be a very successful rental investment whilst at the same time providing good strong capital returns.
To summarise you have a lack of good quality housing, a large population living in overcrowded contions, a good economy and mortgage finance for the first time in history, I think we are witnessing the birth of a housing market, and their is no better time in a property cycle to make a well planned and researched property investment.
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