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By the end of the first quarter of 2021, real estate portal GYODER released the final data for Turkey's Real Estate Index for the fourth quarter of 2020 and summarized the results for the entire year.
So, what are the results of this year, on the one hand, complicated by the pandemic, and on the other hand, the year that opened up new opportunities for this business segment?
General situation and forecasts
The Covid-19 pandemic has affected almost all economic and social “sectors”. Like other areas, the construction and real estate sector has also suffered from this negative process, both in terms of business and in terms of demand.
Nevertheless, given the mass vaccination that has started in a number of countries (as well as in Turkey), analysts believe that by the end of the first half of 2021, global economic activity will begin to return to normal. As for the Republic of Turkey, the IMF report on its development prospects at the end of last year predicted that the country's economy would grow by 5% in 2021. And according to the data revised by the IMF, taking into account the January indicators, the percentage was increased to 6%.
By the way, it was the construction sector that was one of the few in 2020 that made a significant contribution to the macroeconomic perspective in terms of creating jobs and preventing unemployment.
The Turkish Statistical Institute (TÜİK) confirms that the country's economy has shown positive growth, despite the current - and quite diverse - unfavourable conditions.
The construction and real estate sector is recovering thanks to a strong demand after its decline in previous quarters. The measures taken by the authorities to increase demand in this area had a positive effect on sales figures. While the total sales of residential real estate in 2019 amounted to about 1,348,000 units, in 2020 this figure reached over 1,499,000 units (+ 11.2% ). In addition, Turkey has become the country with the highest growth rate of property prices.
The most important factors driving the growth of sales in the residential sector are a noticeable decrease in loan rates in state-owned banks. The second factor is a gradual reduction in the volume of housing supply (it is being sold out rather quickly), which additionally provokes an increase in demand.
The world's pandemic has also radically changed the construction industry. The sector is forced to be flexible taking into account plenty of different factors: from financial (risk and asset management) to socio-psychological (which are now as important as macroeconomic indicators). The industry has had to rethink many things that remained unchanged for many years, including the principles of selling property and even the choice of construction materials. Building structures, architectural solutions have undergone a reassessment, environmental awareness has become more important. The report states that it is necessary to make construction process more sustainable, with lower carbon emissions and with a lower impact on the environment. So, in terms of sustainable development, it has been discussed that a list of national climate standards should be developed and implemented in the construction sector, taking into account environmental requirements. Because today the sustainability of development projects significantly affects the investors' opinion.
Developers also have to take into account the dramatically changed consumer behavior and completely new priorities that have formed over the past year, especially when it comes to "generation Z".
Last but not least, the role of banks has also been reconsidered. The construction and real estate sector requires a special banking structure in Turkey, which will ensure a long-term financial support of this sector. It will be able to issue shares and other securities in the real estate sector. As a result, private investors will be guaranteed lower costs in the long term, and the predictability of the sector and its components will increase.
By the way, for the planned urban transformations in a number of regions, as well as the modernization of the housing stock in order to make it more earthquake resistant, analysts find it reasonable to organize financing models for these projects and related products through the aforementioned new bank system.
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Construction and real estate stats 2020
- Housing
In total, 1,499,316 housing units were sold in 2020.
In the fourth quarter, sales went down by 37% comparing with the third quarter because of the higher interest rates on home loans. The total number of transactions for the last quarter of the year reached 338,038.
New home sales for the fourth quarter of 2020 compared to the same period in 2019 decreased by 36.7%, secondary home sales decreased by 26.3%.
Mortgage transactions for the same period - October-December - decreased by 55.3% compared to October-December 2019 due to an increase in interest rates on housing loans. The total number amounted to 64,647 transactions.
Despite the decrease in sales, there is an increase in housing prices.
Sales to foreigners increased by 8.0% compared to the third quarter. In October-December 2020, residents of other countries became the owners of 14,647 housing units.
In the fourth quarter, Istanbul took first place in this type of sales with 49.2%. Antalya came in second with 17.8%.
- Loans
The total volume of consumer loans amounted to TL 676 billion. As of the end of December 2020, the volume of housing loans reached a total amount of TL 278.3 billion, which is 41.2% of the total loan amount. That is 1.5% lower than a year earlier (42.7%).
- Offices
The area of office premises in Istanbul at the end of 2020 did not change over 12 months, remaining at the same level as a year earlier - 6.46 million square meters. However, according to forecasts by Moody's Analytics, the office segment will revive in 2021, especially since the growth in the use of office space in Istanbul is still the largest in Europe. By the end of 2021, it is planned to complete and commission additional 1.5 million square meters of new office space in Istanbul ( the Turkish Real Estate Index-2020 does not provide data for the whole country. - Ed.)
The office real estate market in Turkey, as well as throughout the world, is changing under the influence of the pandemic. Along with the expected partial economic recovery in 2021, the office real estate market is expected to revive as well. However, Turkey expects a "redistribution" of this segment, since now companies need to switch to more modern solutions, taking into account the requirements for "healthy" (safe for health) workplaces and remote work.
- Shopping malls
By the end of 2020, the area of existing retail spaces in Turkey reached 13.6 million square meters. At that moment, there are 447 shopping malls working in Turkey (we do not take into account restrictions during lockdowns), of which 37% are located in Istanbul.
In addition, 958,000 square meters of retail spaces are under construction, they are expected to be completed by the end of 2022. By this time, the total area of shopping centers in the country will exceed 14.5 million square meters.
As for the density of organized retail trade, there are 163 square meters of rented space per 1000 people in Turkey. However, in Istanbul this figure is twice as high - 328 square meters. Ankara is the second city in this rating, with the density of retail trade kept at the level of 300 square meters per 1000 people. Izmir is also among the leading cities in terms of the number of shopping centers: by January 1, 2021, the city featured 26 shopping centers.
- Warehouses
According to current data, in the Istanbul-Kocaeli region - which is the center of the logistics market in Turkey - the stock of warehouses for commercial use is 6.64 million square meters (out of the total country's warehouse stock with an area of approximately 10.4 million square meters). The area of warehouses and related facilities under construction reaches about 558,000 square meters.
The logistics market, which experienced a significant decline in the first quarter of 2020, showed impressive results in the second quarter, driven by online sales, which became very popular during the Covid-19 outbreak.
As of the end of 2020, the average rent in the logistics market is TL 4.50 per square meter.
- Hotels
The total number of foreign tourists visiting Turkey in the fourth quarter of 2020 decreased by 72% compared to the same period in 2019. 38% of travelers from other countries chose Istanbul, 26.4% - Antalya, 5.5% - Mugla. The fourth and fifth places in the list are occupied by Ankara (2.9%) and Izmir (1.9%). The hotels had to hastily restructure their services to meet health and safety requirements. Hotels with a total volume of 487,000 rooms received the required licenses to operate during the pandemic. There are 806 hotels with 215,000 rooms operating in Antalya, 644 hotels with 64,000 rooms operating in Istanbul and 411 hotels with 51,000 rooms operating in Mugla province.
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