This year Istanbul property prices have increased more than a percentage point higher than they did during 2014 but is this an unsustainable boom and is Istanbul and the wider Turkish property market on the brink of a market correction?
Istanbul has proved to be a magnet for overseas investors for the past five years with prices consistently rising year on year. According to Knight Frank’s most recently published Global House Price Index, Turkey is second only to Hong Kong when it comes to rising property prices.
In the 12 month period between Q2 2014 and Q2 2015 property prices had increased by 18.5% in the country as a whole just behind Hong Kong’s 20.7% rise.
Much of the sustained growth in Turkey’s property market can be put down to investment coming in from the Middle East where officials have been on a charm offensive to lure investors in to the Istanbul property market.
Several property agents have also set up in recent years with the aim of tapping into the appetite for property in Istanbul and rental yields on residential apartments often claimed to be in the region of 8%.
Yet as anyone in the UK can testify, there is no such thing as an endless boom and sooner or later a correction will come and when it does it can leave investors out of pocket if they have invested at or near a market peak.
Much of the energy in Turkey’s construction boom has been backed up by an economy that rebounded strongly from the global financial crisis. Back in 2011 Turkey’s export market was helping to fuel outstanding GDP figures when the rest of Europe was flailing around and trying to recover.
Unfortunately Turkey currently imports more than it exports and this cannot continue for too long. With an economy that appears to be overheating with inflation running at 9%, debts soaring and millions of refugees flooding into the country, Turkey’s economy is looking more vulnerable than ever.
Istanbul is known as the bridge that joins Asia to Europe but at the moment its property market looks to be in danger of suffering from a squeeze that could yet bring an end to the boom.