Turkey: Economy and State

Investor infrastructure, political development, inflation & co. A comprehensive look at Turkey as an investment destination.

In summary: Istanbul in numbers

• Total number of home sales in Turkey between 2013 and 2018: 8 million.
• Total housing stock in Turkey in 2018: 34.2 million.
• Total number of house sales to foreigners in Turkey between 2013 and 2018: 134,000
• Class A office supply in Istanbul in 2019: 5.7 million square meters
• Active gross leasable area in shopping malls across Turkey in 2019: 14.5 million square meters
• Total logistics real estate stock in Istanbul in 2019: 4 million square meters

Source: Investment Office of the Presidency of the Republic of Turkey

Infrastructure: airports, railways, bridges

If you invest in Istanbul, you’ll be in the city in no time. Turkey has been investing large sums in the development of its infrastructure for a long time. In the years around 1990 to 2000, many new airports were built in the country. In 2010, there were 99 active airports in Turkey.

Investments in the road and aviation sectors will continue in the coming decades, as can be seen above from the large investments. According to the Ministry of Transport, it appears that the Erdoğan government will rebalance its policies in the infrastructure sector and build at least 10,000 kilometers of high-speed rail lines.

Chinese companies in particular are helping to finance the projects. Double-track railways between Ankara and Istanbul and between Ankara and Konya are currently under construction.

Of great importance in the infrastructure sector, Istanbul has become an “infinite city” where not even the construction of a third bridge connecting Europe and Asia will solve the complex traffic problem.

The infrastructure is certainly needed, after all, the Turkish state is growing continuously.

Population: Forecast 2024

Stability also often lies in the reproduction of the population. This is where the intergenerational contract kicks in. Here you can see the total Turkish population from 1980 to 2018 and forecasts until 2024 (in millions of inhabitants).

You can find more statistics at Statista

Political development: party and leadership

Turkey is a constitutionally secular republic. Actually. President Recep Tayyip Erdogan’s Justice and Development Party (AKP) has pushed an Islamist agenda and eroded democracy piece by piece.

Erdogan further consolidated his power after the 2018 elections, allowing an AKP coalition with the Nationalist Action Party to retain control of the unicameral National Assembly. While Erdogan won a narrow victory for a second four-year term as president.

25 percent still work in agriculture

Turkey’s largely market-based and diversified economy is driven by its industrial and service sectors, but traditional agriculture still accounts for about 25 percent of employment.

Although the economy has proven resilient in the past, political instability has blocked necessary reforms, and a currency crisis and recession in 2018 have put the country under severe pressure. The resilience of the Turkish economy is due to sound public finances, well-capitalized banks, and a dynamic and diversified private sector.

Until 2018, economic growth was pretty much always stable. Until a currency and debt crisis plunged the economy into recession.

Inflation rate: Forecast 2021

Inflation rate from 1980 to 2019 and forecasts to 2021 (year-on-year).

Reforms: Labour market and justice

The economy thus requires reforms to make the labor market more competitive. More urgently, the government will need to strengthen the effectiveness of the judiciary and the fight against corruption, both of which were damaged after the crackdown following the 2016 coup attempt. The event also caused major waves in Germany.

The most famous case is probably the arrest and imprisonment of journalist Deniz Yücel. But the Jan Böhmermann case also made headlines, due to “lese majeste”, a remnant in the German legal code that has since been abolished by the case.

Unemployment rate

Unemployment rate from 1980 to 2018 and forecasts to 2021:

Rating: Fragile States Index (FSI)

Assessment according to the Fragile States Index (FSI) from 2010 to 2020.

You can find more statistics at Statista

International market position & growth

Turkey’s largely free market economy is driven by industry and increasingly by the service sector, although the traditional agricultural sector still accounts for about 25% of employment, as described earlier.

Out of 137 countries covered in the 2017-2018 Global Competitiveness Index, Turkey ranked 53rd, down two places from 2016-2017 but still higher than the historic low of 43rd in 2012.

The depreciation of the lira in 2017 helped Turkish exports, and the government stimulated domestic demand by strengthening monetary and fiscal policy.

The government is playing a more active role in some strategic sectors and has used economic institutions and regulators to target political opponents, undermining private sector confidence in the judicial system.

Credit rating: reduction by rating agencies

Between July 2016 and March 2017, three rating agencies downgraded Turkey’s sovereign credit rating, citing concerns about the rule of law and the pace of economic reforms.

Economic impact of the crisis

German-Turkish trade relations

GDP (Gross Domestic Product): Current

What do the latest figures from the Turkish Statistical Office tell us?

The growth rate deteriorated in 2018, but the 2019 figures also give pause for thought. Data released in March 2019 from the statistics office show the effects are carrying over. After a sharp contraction in the previous quarter, which was 3%, as value added fell by 8.7% in the construction sector, 6.4% in industry, 0.5% in agriculture and 0.3% in services.

Gross Domestic Product (GDP) fell from $851.5 billion in 2017 to $784.1 billion in 2018. In the fourth quarter of 2018, GDP was $184.9 billion, which is the lowest amount since the first quarter of 2017, when it reached $175.9 billion, while GDP per capita at current value in 2018 was about $960,000 dollars.

GDP forecast 2024

Gross domestic product (GDP) in current prices from 1980 to 2018 and projections to 2024 (in billions of US dollars).

Here you can see real gross domestic product (GDP) growth from 1980 to 2019 and forecasts to 2021 (year-over-year).

GDP per capita: real growth for inhabitants

GDP is a top indicator of the overall economy, but what do individual residents get out of it? Is GDP per capita rising or falling? Here you can see the gross domestic product (GDP) per capita in current prices from 1980 to 2018 and forecasts to 2024 (in US dollars).

Factor: Tourism

Agriculture, industry, services, all important sectors of Turkey. Looking at the country as a whole, one sector in particular stands out, tourism. Already a large part of Turkey’s GDP. But by 2028, Turkey should be able to increasingly detach itself from tourism, as seen here. This is the evolution of the direct and total contribution of the Turkish tourism sector to GDP from 2012 to 2028 (in billions of euros).

• 2012: 35,54 %
• 2018: 32,78 %
• 2028: 33,14 %

Investing in real estate: Prices

While you can buy only 16 m² for 1 million in Monaco, 25 m² in New York and 28 m² in London, as an investor you get 98 m² for the same price in Istanbul. In comparison, you would currently get 77 m² in Berlin. Let’s start with the most important fact: What do I get for my money?

Square meter price

Here you can see the current prices per square meter worldwide. The big question is how much living space do you get, exemplified by $1,000,000. Similar to the “Big Mac Index”, this calculation is good to compare the different cities.

For $1 million, you get:

• Monaco – 16 m²
• New York – 25 m²
• London – 28 m²
• Berlin – 77 m²
• Istanbul – 98 m²

Turkey on top in financial support

70% of property owners in Turkey have received help with property financing. Here you can see the percentage of property owners who received financial assistance in selected countries around the world in 2012.

You can find more statistics at Statista

Price levels in comparison: living in the city

How cheap or expensive is living in Istanbul? Compared to the other metropolises, you can quickly see that life in Istanbul is relatively cheap at only 66.3 points. In Germany, the price level is currently 73.8 (Munich) and 72.6 (Frankfurt). Price level in the world’s most important metropolises (in points):

• Oslo 103.0
• Zurich – 100.0
• Tokyo – 83.4
• New York – 74.1
• London – 73.9
• Istanbul – 66.3

New investments! View real estate now

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Istanbul, 41250: Villa in Kartepe

1,810 SqFt Cardpe

• Property: Istanbul, 41250: Villa in Kartepe

Istanbul, 34530: Penthouse Loft in Kumburgaz

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• Property: Istanbul, 34530: Penthouse Loft in Kumburgaz

Der Beitrag Investment Istanbul (Turkey): Real estate as an investment? Economy, GDP + Development erschien zuerst auf ℄ Real Estates.

Income capitalization approach: how does the calculation work?

The capitalised earnings value method determines the capitalised earnings value of the property and is used to value properties that are expected to generate an economic return. The capitalised earnings value is meaningful when yield considerations are at the forefront in the case of rented properties and commercial properties. Capital investors and investors in particular can use the capitalised earnings value to compare alternative forms of investment. In the case of commercially used or rented properties, the determination of the capitalised earnings value is also the basis for the mortgage lending value of the property.

Market value of the land and the building income value

The capitalised earnings value method divides the property into the market value of the land and the building income value. This includes rental income, maintenance costs and costs for managing the land and building. Accordingly, the rental income less the management costs and the land value including its interest are compared.

Calculation example: Income value – simply calculated with Lukinski

For the calculation of the income value of your property, we assume the following information as an example. This information can then be used to calculate the values of the gross annual amount and the annual net income as well as the operating costs.

• Area: 200 square meters
• Price: 7 euros per square meter
• Operating costs: 25 percent
• Property interest rate: 7 percent
• Land value: 100.000 Euro
• Building damage: 3.000 Euro
• Expiry date: 12,50

Calculation of annual gross amount, annual net income and operating costs

• Annual gross profit = 200 sqm * 7 Euro / sqm * 12 months = 16.800 Euro
• Operating costs = 16,800 euros * 25 percent = 4,200 euros
• Annual net income = 16,800 Euro – 4,200 Euro = 12,600 Euro

So after deducting the costs, 12,600 euros are left over from the annual rental income. The following continues to apply:

• Land value interest = 7 percent * 100,000 euros = 7,000 euros
• Preliminary capitalised earnings value = 12,600 Euro – 7,000 Euro = 5,600 Euro

Calculation: Building income value and capitalised earnings value

For the building income value, the provisional income value is multiplied by a multiplier. The multiplier is a key figure calculated from the property interest rate and the remaining useful life. The longer the remaining useful life of the building, the higher the multiplier. To determine the income value, any structural damage is then deducted from the building income value and the market value of the land is added.

• Building income value = 5,600 Euro * 12.50 (multiplier) = 70,000 Euro
• Earned value = 70,000 euros – 3,000 euros + 7,000 euros = 74,000 euros

Let the professionals do the math

Our team of investors will be happy to draw up yield calculations for your desired property. Prospective buyers can be convinced of good returns. Upon request, we will inform you of the data required for the calculation. After receipt of the documents, we take over the determination of the capitalized value and give you a first estimate of the yield.

Valuation for the sale of real estate

All important information about the valuation of real estate sales summarized for you: Valuing a property.

Material value method: Value for the new construction of a property

The calculation first uses the standard land value to determine the market value of the land, then the real value of the building is added.

The real value of the building is calculated on the basis of the building’s production costs less any reductions for age. The real value of the land (market value of the land) and the real value of the building are added together and multiplied by a real value factor.

Value in kind = (100,000 Euro + 150,000 Euro) * 0.5 = 125,000 Euro

The calculation of the asset value factor is based on the building type, the preliminary asset value and the standard land value. The total tangible asset value determined in this way indicates the financial resources that would be required to rebuild the property.

• Real value method

Comparative value method: Comparison of similar properties

The comparative value method compares your property with similar properties. It is used in particular for the sale of owner-occupied apartments and houses. The comparative value can also be determined for undeveloped land.

Price per square metre of the comparable property = 300,000 Euro / 100 sqm = 3,000 Euro per sqm

Purchase price of the property to be valued = 3,000 Euro * 200 sqm = 600,000 Euro

Only properties in similar locations and with a comparable layout are considered in the comparison. The properties included in the valuation should come from the immediate vicinity of the residential property. The comparative value method is considered to be particularly realistic. It is frequently used to determine the value of properties because the locations are relatively comparable from a regional point of view.

• Comparative value procedure

Value appraisal (costs)

Who prepares appraisals for real estate? What does a house appraiser cost? What does an appraiser for old buildings cost? Unless legal regulations require the appointment of an expert, a real estate appraisal will provide you with a realistic valuation of your property in the regional and national market. We provide timely and accurate valuations of land, residential and commercial properties.

However, if the valuation is to be presented in court, for example in the case of a divorce, experts must be consulted for a fee. The residential or rental property is inspected on site. As a rule, both a written and a digital copy of the appraisal are issued.

• Valuation report

Der Beitrag Income approach: Apartment, house & apartment building – Real estate valuation erschien zuerst auf ℄ Real Estates.