Emlakkulisi Portal published a report on the results of the real estate sector for January-June.
Key conclusions: first, both buyers and tenants have reoriented mainly to “housing in the bosom of nature,” while giving a clear preference to detached houses - the most spacious.
And the second - real estate investment funds, which allow investors to distribute assets according to their preferences, taking into account possible risks during the ongoing COVID-19 pandemic, which greatly “added” their popularity in the first half of 2020, remain relevant in 2021.
Content:
- Half-year sales results
- The most demanded land is in Istanbul
- Offices “reviving”
- Shopping centers and their number per capita
- Warehouses
- Hospitality sector
- Increase in construction costs
The total budget of these funds has increased by 45.6% over the past year, reaching a threshold of 9.8 billion Turkish Lira (TL). The funds themselves “grew” in scale in January-June 2021 by 18%. The number of funds with more than 10 million TL has reached 49.
Commenting on the statistics collected in the report, Re-Pie Portföy Yönetimi A.Ş Dr. M. Emre ÇAMLIBEL explained: “The market expects that in the second half of 2021 the pandemic will be more under control, and by the end of the year, global economic activity will normalize. When we look at the performance of the Turkish real estate sector as a whole in the first half of 2021, we see that the effects of the pandemic continue to affect both the way companies operate and the balance of supply and demand; in all other sectors, however, as well - not only in real estate. On behalf of Re-Pie Portföy Yönetimi A.Ş, I can say that we have continued to contribute to the growth of capital markets in Turkey by investing in potentially profitable segments of the economy such as real estate. We are the first alternative investment fund management company in Turkey to be licensed to operate; and today, in our 12 real estate funds, this sector accounts for approximately 23% of current investments. The real estate sector has created some potentially interesting investment opportunities over the past year; and if we add our experience and our own dynamics to this, last year Re-Pie Portföy Yönetimi A.Ş performed well. I believe that the same chances in real estate will appear periodically in the near future, so our company will continue to make more and more investments. In particular, in offices and in the logistics sector.”
Half-year sales results
In the first 6 months of 2021, home sales in Turkey decreased by about 11.5% compared to the same period in 2020 and amounted to 552,810 units. 167,878 transactions of them are “primary” (new buildings), and 384,932 transactions were registered in the category of secondary housing.
The number of mortgage sales decreased by 60.9% due to the fact that interest rates on a house loan were in the “plug” of 17-18% on an annualized basis (or about 1.5% monthly, since it is the monthly rate that appears most often in the news). As a result, only 104,168 mortgage transactions took place.
Sales of primary housing in January-June of this year decreased by 15.1% compared to the same period in 2020, secondary housing fell as well but by 9.8%.
According to the results of the first half of the year, the ratio of “primary” sales (new buildings) to the total volume of transactions remained practically unchanged, falling by a slight 1.3% and totaling 30.3%. The volume of other transactions categories compared to January-June 2020 increased by a quarter: + 25.2%. It totaled 448,642 successfully sold real estate units. As for the indicator of the last month of the half-year, 190,012 housing units were sold in June 2020, and 154,731 in June 2021. Analysts hope to please everyone interested in record transactions statistics by the end of 2021.
The most demanded land is in Istanbul
As for the zoned plots offered to buyers for subsequent housing construction, the most expensive was the land in Istanbul: 1143 TL per 1 sq. m. Izmir is in second place by a very small margin - (1043 TL).
As for agricultural land - orchards, vineyards, fields, etc. - even here, according to the results of the first half of 2021, Istanbul is in the lead: 111 TL per “square”.
A year earlier - in June 2020 - the average cost of 1 square meter of land in Turkey allocated for housing construction was 543 TL. Over the year, it added 35% in price, reaching 733 TL.
We talked about a new trend for Russian investors - land purchase - in this article.
Offices “reviving”
The process of “returning” companies to their offices has already started: workrooms are gradually filled with employees who have been at a “remote location” for many months.
The commercial property price index in Turkey in June 2021 increased by 1.1% compared to the previous month and reached 200.77 points: this is + 31% compared to May.
Office rental rates in Turkish Lira increased in the first half of 2021 compared to the second half of 2020. Although transactions volume in the office real estate market decreased under the influence of the pandemic in the first quarter of 2021 compared to the same period of 2020, as well as the fourth quarter of last year, analysts predict that rents will “grow” from July to December 2021 since the companies have already prepared the so-called “roadmaps” (strategic action plan. - Ed.) for the return of staff to offices.
Shopping centers and their number per capita
The indicator of the so-called “turnover” per square meter of leased space in shopping centers decreased in April 2021 by 21.7% compared to the same month of 2020, to 273 points (without inflation adjustment). The report also discussed the fact that the impact of medical restrictions, as well as the impact of economic measures during a pandemic on the turnover of shopping centers and the number of visitors in them does not reflect the real situation, as well as current trends.
As of the first quarter of 2021, the total number of shopping centers in Turkey was 447, with a total leasable area of 13 million 591 thousand square meters.
Istanbul accounts for about 37% of the total area rented in shopping centers from this volume.
The average area of a shopping center per thousand people is now 163 sq. m. throughout Turkey. Three leading cities in terms of the number of shopping centers in the country are Istanbul, Ankara and Izmir.
Warehouses
Compared to other sectors, the logistics market suffers the pandemic with the least losses. Despite the slowdown and halt in production at industrial sites, demand for urban warehouse space increased with the increase in e-commerce (online sales) during this period. Thus, investors who invested their free funds in warehouses benefited: with the growth in demand, the rent increased in Turkish lira, while in dollar terms it remained stable.
In the second half of 2020, the volume of free (unclaimed) warehouse space decreased in almost all regions compared to 2019. Warehouses are especially in demand in large cities, primarily in Istanbul. Free storage space is expected to continue to decline as the “pandemic effect” continues; accordingly, the rent in Turkish lira per square meter will continue to grow.
Hospitality sector
According to the Ministry of Culture and Tourism, despite the pandemic, the flow of tourists to Turkey has already sufficiently leveled off. In January-March 2020, about 4.6 million foreign guests arrived in the country, in January-March 2021 - 4.2 million; at the same time, a colossal flow of Russian tourists “poured” into Turkey for obvious reasons starting in June, since the announcement of “normalization”.
As a result, the number of issued permits for the construction of hotel facilities increased by 87% in the first quarter of 2021 alone compared to the first quarter of the previous year, and permits for commissioning - by 37%. As of March this year, 341 permits were registered for construction and 164 permits for putting hotels into operation with the relevant authorities.
Thus, investment in hotels is gaining momentum.
Recent openings include MGallery The Bodrum Hotel Yalıkavak in Bodrum, Radisson Collection Hotel, Bodrum in the same area. Swissôtel Residences Bodrum Hill complex managed by an international hotel company is of interest as well.
We have recently published recommendations for investment in the hotel segment in resort areas.
Increase in construction costs
Construction costs are on the rise, primarily due to higher prices for construction materials. The rise in construction costs, accordingly, provokes an increase in both housing prices and rent.
At the same time, construction industry is by no means in stagnation: its development can be monitored based on the statistics of the issued permits for certain buildings or structures construction. According to the report for the period January-March 2021, the number of building permits issued by municipalities in the first quarter increased by 131.8%, their future area – by 87.5%. The so-called “prime cost” has increased by 144.3% at once.
According to analysts, construction cost index in June 2021 increased by 2.89% compared to May, and immediately by 42.48% - compared to a year earlier (in 2020). As for building materials, they went up by 53.7%.
How does this affect the housing sector? Inflation is on the rise; construction costs are increasing, house prices, as we have already mentioned, are also increasing; and sometimes unreasonably fast. As a result, rental rates rise, which may ultimately lead to the formation of the resulting gap between customers’ needs and capabilities (buyers and tenants), a kind of “bubble” - both in the sales segment and in the rental segment, when, perhaps, prices for both will have to be regulated at the government level (at least for some categories of residential real estate). Seeing as already now, the payback period for expensive housing in some regions has increased from the usual 20 years to investors to 30-40 years.
Let us recall that prices in the largest cities in Turkey have grown by 24-32% in the last year alone (by 29.4% on average in the country).