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The real estate market in Turkey is no longer a novelty for foreign investors. It has been almost 12 years since the implementation of the property ownership law for foreigners in Turkey, which roughly represents four investment cycles according to our market analysis. If an investor can achieve a net profit of 50% on capital during each cycle, which is very possible with proper selection, it means that over a period of 12 years, or four investment cycles, a non-compound return of 200% and a compound return of 500% can be realized based on the dollar.
This means that an investment of $200,000 in 2012 could reach one million dollars today. Many readers, especially those who have not succeeded in achieving a successful real estate investment, may believe that these numbers are exaggerated, even though they are calculated based on a mere 50% return over three years, while correct investment properties in Istanbul have achieved returns exceeding 200% between 2020 and 2023 (precisely when everyone was afraid of the coronavirus and selling their properties at significant losses).
Unfortunately, the judgment that real estate investment in Turkey is not profitable has become obvious to a considerable number of individuals who were considering establishing a real estate investment in Turkey or expanding their current investments. This is clearly indicated by the official real estate sales statistics to foreigners by the Turkish government, as seen below:
The number of properties sold in Turkey to foreigners during the month of December last year was only 2,064, which is the lowest number in over five years. Even throughout the entire year of 2023, the number of properties sold to foreigners was low compared to previous years. The important question here is whether the Turkish real estate market has truly come to an end and is no longer profitable from now on.
The clear and definitive answer is provided in the statistics below, which indicate the number of properties sold in Turkey, but this time to Turkish nationals rather than foreigners:
From the above official statistics, we observe the following:
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The number of properties sold in December was 138,577, which is 33% higher than the number of properties sold in November of the same year (just one month prior). This is a significant month-to-month increase, especially during a period of monetary tightening and high interest rates, which necessarily indicates that this is a challenging time to obtain a bank loan for installment-based property purchases.
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If we compare the number of properties sold in December throughout all of Turkey (138,577 properties) with the number of properties sold to foreigners in the same month (2,064 properties), we note that the proportion of foreign sales compared to the local market is only 1.49%. This clearly indicates that local demand is still present, and real estate developers cannot be affected by the decline in foreign sales. Therefore, foreign investors who are waiting for prices to drop due to declining foreign demand are wasting their time and missing out on current opportunities.
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The year 2023 witnessed monetary tightening, resulting in lower demand compared to previous years, even in the local market. However, this is precisely what creates real investment opportunities, as negotiation becomes easier and more flexible.
As long as there is significant demand for property purchases in Turkey's local market, real estate investment remains attractive. The question here is why some foreign investments have failed.
The reasons that led to the failure of real estate investments include:
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Lack of knowledge: A general lack of knowledge is the main reason for unsuccessful investments. Specifically, there is a lack of understanding about the real estate market in Turkey, particularly in Istanbul. Many foreign investors tend to focus solely on property prices without considering the differences between cities, regions, and even neighborhoods within the same area. It is important to have a comprehensive understanding of the structure and diversity of properties in Istanbul to make informed investment decisions.
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Lack of knowledge about real estate investment strategies and timelines: Understanding how to invest in real estate and having a clear plan regarding investment timelines is crucial. It is important to conduct thorough research and seek professional advice to develop a successful investment strategy. Investing in properties outside of Istanbul, such as villas or properties, may result in lower profit potential. Additionally, investing in areas with numerous similar new projects with the expectation of easy resale and significant profits can be risky. It is also not advisable to purchase multiple cheap properties in unattractive areas solely based on low prices, as it may be more beneficial to invest in a single property in a promising investment area.
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Lack of knowledge about construction and property developers: Understanding the construction quality and reputation of property developers is vital. There have been instances of manipulation and fraudulent practices in the real estate market, especially in recent times. Therefore, it is crucial to research and verify the credentials and track record of property developers before making investment decisions.
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Overall, lack of knowledge and understanding about the real estate market, investment strategies, and construction practices can contribute to the failure of real estate investments. It is important for investors to conduct thorough research, seek professional advice, and make informed decisions based on reliable information.
What is the definition of a trusted real estate developer?
A trusted real estate developer is one who has a good reputation based on previous projects that speak to the quality of construction they provide and how well it aligns with the technical specifications outlined in the sales contracts and used in the show apartments visited by clients during the purchase process.
This means that caution is very important when purchasing property from a new developer who has no previous projects, neither in Turkey nor elsewhere. This caution should be even greater if the price of the property is significantly lower than properties that share the same specifications and location. Ultimately, the real estate developer's profit margin is fixed, and any additional price reduction means a reduction in the quality of the materials used in construction and insulation.
A trusted real estate developer is one who cares about the hidden foundations of the building to resist earthquakes and structural deterioration, not just the visually impressive exterior finishes that dazzle the client during the purchase but may lead to regret after several years, and sometimes months.
A trusted real estate developer is financially capable of delivering their project within the established timeline without delay. The investment timeline is of utmost importance in achieving a high return, and one cannot rely on a real estate developer who is not committed to delivering their project on time, regardless of the initial price they offered.
The vastness of the project's land does not necessarily indicate that the real estate developer is trustworthy. However, a small project size and the lack of recreational facilities indicate that the real estate developer undertaking such construction is either a local or unknown developer. The real danger arises when this developer constructs a project consisting of a single building in important central areas of Istanbul, and even worse, when sales begin while the project is still under construction, especially for foreigners who would face great difficulty dealing with any subsequent issues.
Government real estate developers such as TOKI, Emlak Konut, and Kiptaş are always mentioned for their advantages and the fact that their construction is earthquake-resistant and these companies cannot go bankrupt as they are supported by the Turkish government. While this is true, why is it not mentioned that the finishing, thermal insulation, and soundproofing in these projects are weak and can be considered sturdy and affordable projects, but not luxurious and upscale, unless there is a partnership with a private developer who takes care of these matters.
To learn about good projects being developed by a trusted real estate developer when you want to own property in Istanbul, you can contact us for assistance.
