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The so-called warehouse stocks are gradually running out in the Turkish real estate market. That is, vacant apartments and houses are quickly sold out. Considering obvious sphere revival and cardinally new projects launch by many developers (meeting post-pandemic requirements), price situation will soon become completely different.
Therefore, we recommend that you hurry up with the choice. In the meantime, let us talk about the results of the last six months, the situation at the beginning of May 2021, as well as forecasts until the end of the year.
NORMALIZATION PERIOD HAS STARTED. NEW INVESTMENTS AND NEW PROJECTS GO AHEAD
We can say that the construction sector in Turkey, which has been in relative stagnation for the past two years, has successfully survived this period of stagnation. This was partly due to the pandemic, shaking up the market. As experts have reminded more than once recently, the reserve of vacant apartments and houses both in the segment of primary and secondary housing is gradually coming to an end. And this, in a sense, has paved the way for investments growth in Turkish real estate in 2021. The appetite of private investors has also increased.
Anticipating this, developers were puzzled last year to obtain documents for future projects. According to the statistics of building permits published at the end of 2020 by the Turkish Statistical Institute (TÜİK), licenses were obtained for 58 865 new buildings in January-October. The total area of these buildings will be 72 454 226 square meters, where 40.7 million square meters (or 56.2%) are residential buildings. We are talking about 354 807 new apartments with a total value of 129.6 billion Turkish liras (TL).
As we have mentioned earlier, the housing stock in coronavirus 2020 was rapidly melting as interest rates on home loans and mortgages dropped to the lowest level in the history of the industry.
But since 2021, rates have gone up. Builders are reorienting to new technologies, which, although they will make newly erected houses better and more reliable, will nevertheless lead to higher construction costs due to increased costs for materials, technologies, etc.
All this will inevitably affect housing prices: new projects will be offered for sale at higher prices than units in existing houses.
ALREADY ANNOUNCED PROJECTS
Among the interesting complexes, information about which has already been confirmed at the end of 2020, and where sales should start very soon or have already started:
- timeshare project Kızılbük Termal Devremülk in Marmaris (the announced completion date is 2023), developer - Sinpaş GYO, sales there are already open;
- Koru Blokları housing project in Kandilli (ski resort in Erzurum province);
- the NATA project in the center of the Turkish capital Ankara with 700 private residences at once;
- luxury residences project Superior Suites Kordon Istanbul in Istanbul, developer - the well-known company Ege Yapı;
- OYAK project in Başakşehir (one of the districts of Istanbul province), where sales are already open;
- the Nidapark project in Çengelköy (Istanbul province), Tahincioğlu holding brainchild, it has begun accepting applications for the purchase;
- Rose Marine Butik (from partner companies Gül İnşaat ve Çebi Yapı), pre-sales have started.
Of course, these are just a few projects from a long list. However, market players assure that in the second half of 2021, a large revival of the market should be expected.
The 2020 pandemic has somewhat darkened the prospects for the construction sector. Despite the fact that large infrastructure projects, including those of a national scale, continued in full swing, developers preferred to complete and sell off the complexes that had already begun. Future projects of the residential complex were discussed in a very limited volume, and new consumer requirements were not yet fully formed at that time. But now the client already knows what he wants: the demand for spacious housing with large balconies and terraces has grown, and comfortable villas and detached houses with gardens are quickly snapping up, especially in the vicinity of megacities. Summer houses, on the other hand, are turning into a place for year-round living. In addition, preference is given to new buildings, rather than old housing stock, which is more susceptible to earthquakes. The cost of rent has risen sharply in all of these types of preferred residential real estate now.
Summing up: housing sales volume in the residential sector, where fewer projects were launched under economy stagnation, has grown so much that 2020 will remain as a record year in the statistics, and for several months there was a campaign to provide housing loans by state banks at extremely low interest rates. Although 2021 may well break the already set record.
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EXPERT EVIDENCE
"The first half of the year is difficult"
Altan Elmas, head of the Housing Development and Investors Association (KONUTDER), summed up that 2020 “… started off well, full of hope, but ended with some difficulties.” Nevertheless, the year was indeed very productive in terms of housing stock melting, despite all its uneasiness.
“We forcibly slowed down real estate prices in 2020, - admitted Mr. Elmas - We, developers, were selling what we built. However, the increase in tariffs for raw materials and building materials for half a year was given to us, developers, very hard. And coupled with an increase in interest rates, this will certainly affect the cost of new housing in 2021, since sales on credit will inevitably decrease.” What we are seeing: now more and more investors prefer to take residential real estate for cash in Turkey.
Also, Mr. Elmas has admitted that market players are looking forward to the onset of the second half of 2021 and predict the volume of private investment with cautious optimism: new projects will appear.
Developers are also counting on government support: if measures to regulate purchase prices are implemented at least occasionally, developers will be able to compensate for the losses incurred in this regard, at least some. And they will be able to safely bring new residential complexes to the market starting from the end of 2021, according to existing plans.
"Housing instead of currency"
Nazmi Durbakayım, Chairman of the Istanbul Association of Builders (İnşaatçılar Derneği, or İNDER) has suggested that a rise in prices due to low supply and prices for raw materials is inevitable in 2021, but the builders of residential real estate will be able to take action. Emphasizing that the trend towards the use of domestic materials will grow, although “... partially sacrificing our profitability (for the sake of sales) has now become an integral part of our strategy.” The expert has also suggested that more and more investors will switch from investing in foreign currency to investing in real estate which is considered the safest in the long term: investors.
Mehmet Kalyoncu, President of the Association of Real Estate and Real Estate Investment Companies (GYODER), agrees with him. Mentioning that real estate is considered one of the safest investment instruments in Turkey: “In our country, where the need for new housing is stable partly for demographic reasons, this sector will continue to grow, demonstrate great potential, and from 2021 will strengthen its position as one of the leading sectors of Turkey economy”.
Changes in this sphere
According to market players, development sphere should noticeably renew itself. With the advent of the pandemic, the trend of sustainable development has intensified, in particular, the interest in environmentally friendly building materials. Much attention will be paid not only to construction safety, but also to life in new housing estates including residents health (Turk.Estate has already talked about the use of contactless technologies in innovative complexes, where even purchases will be delivered by robots).
Zeynep Bodur Okyay, President and CEO of Kale Group, has said: “Turkish building materials industry should be significantly renewed by following technological and innovative developments in the world. Global competition is no longer based on factors such as natural resources availability, cheap labor, or competitive currency. Concepts such as technology, innovation, knowledge and skills, green production will be critical in the competition for the future buyer.”
This is especially true for buildings safety. One of the key milestones in Turkey's construction industry over the past 30 years - if not a key turning point - was the 1999 Sea of Marmara earthquake; thereafter new rules were issued regarding buildings safety, and special attention began to be paid to inspections of building sites and the process of building houses in general. In 2000s, safety became a key trend. Much attention began to be paid to the transformation and improvement of cities, social housing, as well as segment formation of branded housing (which, in particular, is now preferred by foreigners. - Ed. Note). In his opinion, innovations will be of great importance. Moreover, this greatly simplifies construction: for example, the well-known Kalesinterflex ceramics factory, thanks to research and development carried out by Kaleseramik engineers over the years, eventually managed to reduce the weight of one square meter of ceramics from 28 kg to 8 kg, while the thickness of the ceramics decreased to 3 mm while increasing its durability. And this is just one example from the field of building materials.
According to the expert, by 2050 Turkey will have achieved sustainable global success, in particular, in the construction industry: “Over the past 30 years, we have experienced a period when technological developments rapidity, design ergonomics, human factor and environmental factors consideration have become especially important, and competitiveness has become decisive in the field of construction services”. This will continue in the future: according to the specialist, thanks to the pandemic effect, the desire to increase free space, minimize contacts while increasing ergonomics and increasing the importance of comfort (considering design in the first place), innovative, sustainable and environmentally friendly products will come first plan. “Urbanization growth in the world and in Turkey, activities to transform cities will lead to an increase in the demand for environmentally friendly and energy efficient buildings, which will contribute to the development of various segments of construction industry,” said Mr. Okyay. “More than a third of companies around the world have expanded their use of digital technology to adapt to the crisis. As an industrialist, we recognized the flexibility that digitalization provides. However, the pandemic has once again reflected reality. Global competition is no longer based on factors such as natural resources availability, cheap labor, or a competitive currency. Such concepts as technology, innovation, knowledge and skills, green production will be decisive in the international competition of the future.”
WHAT IS THE FORECAST FOR 2021?
According to experts, the term that best describes the current situation is uncertainty. Forecasts and expectations vary greatly, especially in terms of financial data. However, by the third or fourth quarter of 2021, when the epidemic is expected to end, Turkey's construction sector is expected to be in significantly better position than it was before the pandemic. Already, there is an increase in production and export in the field of materials. Well, if collective immunity is achieved in the first half of the year (which there is hope for), restrictions can be largely lifted by the end of the year.
The impact of the current situation on the financial aspect is also important: another factor that will clearly become a determining factor in the construction sector in 2021 will be reforms in the field of monetary policy. It is expected that the Central Bank of the Republic of Turkey will continue to be active in terms of proposing measures for different segments of the economy. Housing loan interest rates are likely to remain high. Construction sector, on the other hand, benefited from subordinate issues provided in connection with the pandemic in 2020, using a total of TL 49 billion of new loans received by real estate companies at favorable, very low interest rates that were available until the end of September last year. The use of new loans has significantly eased financial position of construction and contracting sectors making it possible to settle the job situation.
Market players expect that interest rate will remain at about 15% in 2021.
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WHAT IS ACTUALLY REASONABLE TO INVEST TO?
- housing located within walking distance of major infrastructure projects routes;
- housing in the provinces with the highest price increases
- residential real estate selected considering the ratio of your personal plans and the prospects for return on investment: for detailed information on housing prices growth in the provinces, read here.