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Western EuropeSeptember 3 2006

Investment windows

Turkey’s young population is driving the skyrocketing demand for housing. Metin Demirsar reports on the projects that offer opportunities for investors.
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Demand for public housing is continuing in Turkey’s urban centres, particularly in Istanbul, its largest city, because of an influx of rural migrants displaced from the countryside, rising income levels among metropolitan residents and a booming young population, despite the present turbulence in the economy.

“Six million housing units need to be built by 2012 to keep up with the demand,” says Feyzullah Yetgin, general manager of Emlak Konut REIT, the state real estate investment company.

Turkey has a young population – 50% are under the age of 25 – and 800,000 couples get married every year and want homes, says Mr Yetgin. The country’s population is rising by 1.4% a year, but in the cities of western and southern Turkey, the population is growing by 4% a year because of the migration from the rural areas, according to the Turkish Institute of Statistics.

Nearly 50% of Turkey’s population is already concentrated in eight cities: Istanbul, Ankara, Izmir, Konya, Bursa, Adana, Antalya and Mersin. And 20% of Turkey’s 75 million inhabitants (15 million people) live in Istanbul alone. Istanbul’s population is expected to reach 23 million by 2020, municipal planners predict.

The need for urban renewal is also feeding demand for new housing, contractors say. “Some 50% of housing in Turkish cities needs to be renewed, including 50-year-old buildings, to meet new construction standards,” says Teoman Metehan, CEO of Teknik Yapi Yapilar Sanayi ve Ticaret, a contractor and land developer.

More than 60% of the homes in the cities are slum dwellings, known as gece kondu (night landings): ramshackle structures literally built overnight on private or state property. These sprawling dilapidated habitat communities, which encircle urban areas such as Ankara, Izmir and Istanbul, need to be reconstructed because they have been shoddily built and would probably be levelled by a powerful earthquake, according to experts. Most of the country’s land mass lies along the Anatolian fault, one of the world’s most active earthquake belts. Powerful tremors killed 20,000 people in north-west Turkey in August and November 1999 and left 500,000 people homeless.

While the state housing development administration (TOKI) is spearheading the drive for creation of public housing in Turkey by providing land to private developers and contractors to build new neighbourhoods, private companies have also developed housing projects.

Stiff competition

Istanbul is getting the lion’s share of real estate development with more than 100 large housing projects (between 60 housing units and 7000 apartment flats) under construction.

Contractors have been carrying out advertising campaigns and bombarding television viewers with commercials to sell their properties, often before starting construction work. The consortium Varyap Varlibaslar Yapi Sanayi-Teknik Yapi Joint Venture, which is building the Uphill Court Projects in Istanbul, spent $7m on advertising and commercials.

“When a new bank enters the market, it carries out a major advertising campaign in all the media to promote itself, including newspapers, magazines, television and radio channels and outdoor billboards. We took the same approach,” says Erdinc Varlibas, CEO of Varyap. “As a result of our campaign, we sold 900 flats in two weeks. People were crying because they couldn’t buy the flats they wanted.”

Competition is intense among builders, according to industry watchers. “Everyone has jumped into the market. It is like a drug store [pharmacy] that operates at a busy city intersection and makes hefty profits. Then another drug store opens next door, and then another and then another. Eventually no-one is making any money,” says the general manager of a leading real estate development company.

Many of Istanbul’s housing projects are given English or foreign-sounding names, such as Pelican Hill, Mashatten (after Manhattan), Elysium Garden, Sealybria, Selenium Twins, Sunrise Residence, Trend, Alice Village and Rose Marine Homes.

“Turks are filled with admiration for foreign products. Foreign names on housing projects confuse the mind and give the impression that they are somehow constructed abroad,” says Selçuk Altun, former managing director of Yapi ve Kredi Bankasi, one of Turkey’s largest banks.

Many of the housing projects are in city residences for families that prefer to reside in modern apartment buildings in the city centre without having to deal with the problems of living in the city, according to a report on Istanbul’s residential market by Colliers Resco, a real estate research and consultancy company. “The modern residence projects answer this demand by providing all of the services of a five-star hotel and offering these amenities within the premises to enable the residents to escape the hassle of city life,” the report said.

Urban focus

In the next 10 years, real estate development in Istanbul is expected to concentrate on commercial properties inside the city and housing projects on new sites along or near the junctions of express highways leading to the city.

These will include the townships of Umraniye, Kartal, Pendik, Kurtkoy, Riva, Omerli and Tuzla on the Asian side of the city, and Kucukcekmece, Kemer, Bahcekoy, Dursunkoy and Arnavutkoy on the European side.

Much will also depend on whether the government decides to build a third bridge across the Bosphorus, with connecting express roads.

“The government will soon have to decide how Istanbul is going to grow. To the north or in a linear manner east to west? The former will mean building a new bridge across the Bosphorus; the latter will mean building toward the sea and toward the earthquake belt,” says Serdar Inan, chairman of Inanlar Insaat, a real estate development company.

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