Why to Invest in Turkey especially in Istanbul?
Turkey as a rising star in the emerging markets.
“It’s Berlin and London for core. But it’s Istanbul for opportunity.” says pwc ‘Emerging Trends Europe’ report.
Istanbul bears the characteristic of being the capital city of three Great Empires and it is also one of the few cities which has been the center of the country’s economic life. Although the city did not become the political capital for the new Republic, established in 1923, it has always been one of the country’s economic centers and has never lost its status as the capital predestined for the country.
When we glance at the city’s economy and working-occupational- professional life, Istanbul generates about 23% of Turkey’s Gross National Product (GNP). Its annual contribution to the state budget is about 40%. On the other hand, the city’s share of government expenditures has remained roughly 7-8%.
In 2015 – 22.830 properties were sold to foreigners in Turkey.
The headquarters of all private banks, and 21% of the total number of bank branches in Turkey, are located in Istanbul. Istanbul has a central importance in both domestic and international trade. The added value created in Istanbul, reaches 26.5 percent of provincial total added value, and trade is the second most important sector in Istanbul after industry. In Turkey, 27% of the general added value created in the commercial sector is created by Istanbul. Istanbul is, at the same time the most important export and import gate of Turkey. Exports from Istanbul make up 46% of Turkey’s total, imports into Istanbul make up 40% of Turkey’s total.
Istanbul has at hand a great chance thanks to its being the center of tourism and the location of a convention center. The number of foreign tourists visiting Istanbul has reached 8 million in 2011. One-fourth of the city’s hotels are owned by five star hotels, and almost one-fifth are owned by four star hotels.According to based on growth rate of results of last 2 years.Istanbul ,the most popular Turkish destination among tourists,got the 9 th place while last year it was only on the 11 th.
Furthermore, 14 of the 153 museums located Turkey are found in Istanbul, and 34% of the two million four hundred thousand pieces on display are exhibited in Istanbul.
Istanbul is also the center of the country’s air transport industry. Along with Atatürk Airport, Sabiha Gökçen Airport is located in Pendik on the Anatolian side of the city.
New sectors in the city, such as finance, tourism, service, banking as well as head offices have been substituted for industry in recent years. On the other hand, despite the situation in industry, the heart beat of money markets continues to grow in Istanbul. Due to its geographical location, the first four hours of the business day overlap with Asian countries and the other four hours with European countries. Because of its unique location, Istanbul has become a natural financial center for the entire region.
Today, 35% of collected deposits and 33% of credit used in Turkey occurs in Istanbul. In addition, almost all insurance companies operating in the country are located in Istanbul. The Istanbul International Stock Exchange Free Zone, based in Istanbul, has experienced an exponential growth among the globally known Stock Markets in the world. Moreover, there is a gold market in Istanbul in which gold bars are traded freely. The city forges ahead in becoming a financial center, especially in the domains of leasing, factoring companies, private financial institution, etc.
Istanbul will continue to accelerate the pace of becoming a financial center associated with liberalized financial markets and active stock markets. With the decision of moving the Turkish Central Bank from Ankara to Istanbul, it is expected to turn the city of Istanbul into an important world financial center. The main objective is to turn Istanbul into a head office of the financial centre of the world.
Living in Istanbul
An increasing number of people from various parts of the world are moving to Turkey to start a new life, to work or even to find peace of mind for their retirements.
The country has developed dramatically in the last ten years and the pace of progress in certain fields is nothing short of astonishing. Most of Turkey’s new residents hail from countries like the UK, Germany, Russia, France, Belgium, Ukraine, Saudi Arabia, UAE, Lebanon and Qatar. With its unique geographical location combined with a rich and diverse history, right in the cradle of many different civilizations, Turkey is a privileged place to live for expatriates and their families.
From flats in urban centers to villas in suburbs, there are a multitude of options to choose from when looking for housing in Turkey. Major metropolitan areas have the most modern and complete environment for an extravagant life in the city, where luxurious residence complexes offer all the daily amenities such as private security, kindergartens, sports complexes, social facilities, parking lots and shopping malls for their residents.
The introduction of the Mortgage Law in 2007 enabled even easier financing and took the Turkish realty sector to new levels.
Turkey’s significance on the world finance stage is on the rise. The financial capital of the country, Istanbul, with its rich and vibrant economy, is now slated to become a World Finance Center. The country’s banking industry demonstrated remarkable resilience to the effects of the global financial crisis without any government backing, and Turkish banks are now regarded as the soundest in Europe. With service quality matching and exceeding international standards, Turkish banks are widely acclaimed as being fast integrators of technology into their services. Many foreign banks either operate directly in the country or entered the market via mergers and share acquisitions, providing services in all aspects of banking to individuals and investors alike.
A wide range of insurance services and products are available for both individuals and corporations with very competitive premium rates.
10 Major Facts to Invest in Istanbul and Turkey
1. INVESTMENT CLIMATE
- The second biggest reformer among OECD countries in terms of its restrictions on FDI since 1997 (OECD FDI Regulatory Restrictiveness Index 1997-2012)
- Business-friendly environment with average of 6 days to set up a company, while the average in OECD members is more than 11 days (World Bank Doing Business Report 2014)
- Highly competitive investment conditions
- Strong industrial and service culture
- Equal treatment for all investors
- Around 41,397 companies with international capital in 2014 (Ministry of Economy)
- International arbitration
- Guarantee of transfers
2. LOW TAXES & INCENTIVES
- Corporate Income Tax reduced from 33 % to 20 %
- Tax benefits and incentives in Technology Development Zones, Industrial Zones and Free Zones, including total or partial exemption from Corporate Income Tax, a grant on employer’s social security share, as well as land allocation
- R&D and Innovation Support Law
- Incentives for strategic investments, large-scale investments and regional investments
3. SUCCESSFUL ECONOMY
- Economy is booming; and reached USD 850 B (billion) in 2014
- 17th largest economy in the world and 6th largest economy compared with the EU in 2014
- Economic growth is stable; with an average annual GDP growth rate of 5 % between 2002 and 2015
- Promising economy with a bright future as it is expected to become one of the fastest growing economies among the OECD members during 2014-2016 with an average annual real GDP growth rate of 3.6 % (OECD, February 2015)
- Institutionalized economy fueled by USD 144 B of FDI in the last decade (CBRT)
- Private sector is mature, developed and dynamic; with USD 160 Billion worth of exports
- The total population is 78 million (2014, TurkStat)
- No#1 youth population within the EU (Eurostat)
- The avarage of population age is 30 (2014, TurkStat)
- Dynamic, young, well-educated and multi-cultural
5. HUGE DOMESTIC MARKET
Based on 2014 datas from ICTA, TurkStat, ICCT there are;
- 40 million broadband internet subscribers
- 72 million mobile phone subscribers
- 57 million credit card users
- 170 million airline passengers
- 36 million international tourist arrivals
6. LABOR FORCE
- Over 30 million young, well-educated and motivated professionals (2014, TurkStat)
- Increasing labor productivity
- Approximately 600,000 students graduate annually from over 183 universities
- More than 700,000 high school graduates with around half from vocational and technical high schools
- New and highly developed technological infrastructure in transportation, telecommunications and energy
- Well-developed and low-cost sea transport facilities
- Railway transport advantage to Central and Eastern Europe
- Well-established transportation routes and direct delivery mechanism to most of the EU countries
8. LOCATION ADVANTAGE
- A natural and historical bridge between East-West and North-South axes, therefore creating an efficient and cost effective outlet to major markets
- Easy access to 1.5 Billion customers in Europe, Eurasia, the Middle East and North Africa
- Access to multiple markets worth USD 25 T (trillion) of GDP
9. ENERGY CORRIDOR AND TERMINAL OF EUROPE
- An important energy terminal and corridor in Europe connecting the East and the West
- Located at a close proximity of more than 70 % of the world’s proven primary energy reserves, while the largest energy consumer, which is Europe, is located right to the west of Turkey, thus making the country a linchpin in energy transit and an energy terminal in the region
10. CUSTOMS UNION WITH THE EU
- Customs Union with the EU since 1996 and Free Trade Agreements (FTA) with 20 countries
- More FTAs underway
- Accession negotiations with the EU
Turkey has undergone a profound economic transformation over the past decade and its economic fundamentals are quite solid. It is the 17th largest economy in the world and the 6th largest economy in Europe, with a GDP of approximately USD 820 billion in 2013.
Nevertheless,although with the recent economic crisis and the global economic recession the EU and Us real estate markets have been negatively affected,the real estate market in Turkey is stil promising. While the reduction in demand and a downward trend in house prices have been observed all over Europe,according to TurkStat statistics the number of apartment units sold in Istanbul for 2014 grew to 222,748 of the total sales for Turkey of 1,1165,381 ,a 19,3 % share of the country’s total marketplace. The entry of global actors into the real estate market is increasing the competitiveness of the sector, while massive mergers and acquisitions taking place help its expansion and overall growth rates.According to
official figures foreigners bought in 2015 close to 23,000 apartments in Turkey ,up %20 compared to 2014,with the following breakdown of countries: Iraqi’s 4.228, Saudis 2.704,Kuwaits 2.130, Russians 2.036,Brits 1.054 ,these numbers are summing to more than 50% of the total. Although the choice is wide with 44 different cities,more than 93% of the purchases is done in 10 big cities with Istanbul stil being the No1 choice with more than 30% of the transactions.Second choice is Antalya,3rd choice is Bursa and 4th choice is Yalova.
The number of real estate properties sold reached 290,000 in 2012.
The demand drivers of the Turkish real estate sector are advantageous geographical location, population growth and demographic advantage, increase in income per capita, extensive urban renewal and development, large capacity and power in the construction sector and ease of doing business. The real estate sector in Turkey represents 19.5 percent of total GDP, which brings great investment potential to the sector. The GDP share of the real estate sector increased by 2.3 percent in 2000 and 3.8 percent in 2012. The average share of construction, real estate, rental and business activities and new house sales in total GDP increased by 16.7 percent from 2000 to 2005. However, the sharpest increase, of 20.5 percent, was between 2006 and 2009.
299 shopping centers are operational in Turkey with a total gross leasable area of 8.2 million square meters.
As reason of foreign interest is to looking for investments the only choice is stil largely Istanbul, where the new demand both from locals and foreigners increases every year.The choice of real estate investment in Istanbul is stil focused on the European Side with the main focus on the 3rd airport area and its surroundings to the direction of city center. This year with more and more people discovering the luxury shopping street Bagdat Caddesi with its restaurants and cafes and sea side walking areas on the Asian Side the interest is slowly shifting to Asian side as well.
In the investment side, FDI inflow rose to USD 12.5 billion, while real estate and construction garnered USD 1.6 billion of total FDI in 2012. Sales of real estate to foreigners began to increase following enactment of the reciprocity law and reached USD 2.64 billion in 2012. The Ministry of Environment and Urbanization announced that real estate sales to foreigners increased from 2 percent to 5-6 percent in the last ten months of 2013.If we aggregate real house prices across countries and look at he big Picture,we see that global house prices continue to march slowly upward and this upward and this upward trend is consistent with the pattern of real house price growth across countries.Real estate prices in Turkey leaped an incredible 18,5 percent in the second quarter of 2015 compared to the same period in 2014,making Turkey second only to Hon Kong globally.The market shows no sign of slowing as the year draws to a close.Investors from the Middle East are expected to account for more than %50 of foreign real estate purchases in 2016.
The current situation, along with strategic plans and future projects in the pipeline, bears huge potential for investors in Turkey’s real estate sector:
- Office construction licenses obtained throughout Turkey have increased 27 percent, reaching 6.84 million square meters.
- According to the Turkish State Railways’ (TCDD) investment program, USD 240,145 million will be spent on building logistics centers.
- As of 2012, there are a total of 2,870 licensed hotels with a total bed capacity of more than 700,000, although there is still a gap between supply and demand, particularly in Istanbul.
Furthermore development and the setting of new targets continue with urban renewal and mega projects, including Marmaray, Kanal Istanbul, the third Bosphorus bridge and third Istanbul airport. The Turkish government has decided to renew and retrofit buildings vulnerable to natural disaster, including 6.5 million residences, with a budget of USD 400 billion.
91 shopping centers in Istanbul represent 46 percent of the total leasable
shopping center area in Turkey. With its existing potential, mega projects and ambitious targets set for 2023, Turkey offers great opportunities for investors in the real estate sector.