Not just a city of mosques and bridges any more, Istanbul should be a serious port of call for property prospectors and investors. Istanbul recently topped an Urban Land Institute / PWC survey for the best development prospects, leaving behind 26 significant markets including Moscow, London and Barcelona.

Turkey's steadily growing economy, large young population, increasing number of more affluent consumers and an ongoing housing shortage are all important factors to consider when that country's real estate sector. Turkey's real estate investments were 1.1 billion USD in 2006, and the market is due to grow to 4 billion USD in 2007, according to the Wall Street Journal.

Istanbul has significant importance for the real estate investment boom in Turkey. Istanbul has a population of around 14 million, and with a 35% share of the Gross National Product (GNP) of Turkey it is a substantial commercial and cultural hub in the region. The city physically represents only 0.7% of the Turkey’s total surface area and yet Istanbul has 31% of the country's total housing stock. Istanbul recently topped an Urban Land Institute / PWC survey for the best development prospects, leaving behind 26 significant markets including Moscow, London and Barcelona.

Due to high population growth and increasing urbanisation rates, the demand for residential housing is climbing rapidly, and shows no signs of a slowdown in the near future. The Turkish construction sector has registered quarterly average growth rates of 21.2% since 2005, a figure which is substantially above the GDP growth of the country. The construction boom helped the housing gap to decline significantly, however there is still a deficit of 150,000 units per year. Prices have risen 100 per cent in two years in Istanbul. Buying an apartment flat cost €2,500 per m2 in the city centre and €2,000 per m2 in the satellite towns around the city. Istanbul property is expected to generate on average 8% rental yields and 12.5% capital growth annually.

Most of the recent Istanbul city developments have been of mixed-use - consisting of a combination of shopping centres, office buildings, luxurious city residential apartments and hotels targeting the upper and international market. Apartment flats for this type of upper market apartments and villas range from €2.500 per m2 to €6,000 per m2.

The 179 apartments located in the flagship Kanyon shopping/residential complex - completed in 2006 - are the latest example of a mixed-use project on a grand scale. The one-bedroom flat resale value is now €350,000 - double their original price. Kanyon is an open-air emporium shopping area replicating a natural canyon in form, creating natural cooling air flow. This is a complex that includes a four-level shopping centre, 26-story office building and nine-screen cinema. It has 160 shops selling mainly luxury international products and brands such as Harvey Nichols and Hakkasan - opening its first restaurant outside London - occupy three floors.

The growing economy of Turkey and the increased income level amongst the young population is leading to more investment, especially in shopping malls. Istanbul has 39 modern shopping centres of which 22 were built after the year 2000. There are 16 more shopping malls under construction.

With this seemingly never-ending list of projects similar to Kanyon either on the drawing board or actually under construction, the real estate boom seems set to continue. Not just a city of mosques and bridges any more, Istanbul should be a serious port of call for property prospectors and investors.

Turkey has many of the ingredients of an excellent investment location as well as being popular tourism destination with low real estate prices, buy-to-let and a strong re-sale market.

Low Real Estate Prices
The housing market in Turkey was held up behind Europe as a result of the difficulty of obtaining mortgages. The majority of real estate purchases until recently were funded through inheritance or savings, which set a limit on the flourishing property market simply by not being affordable. The Turkish Government is committed to strengthening the mortgage market, which is an important step because short loan terms and high interest rates mean that at the moment only 3% of housing finance in Turkey currently stems from bank credits. Turkey approves a new mortgage law this February (2007). This new law is expected to be enacted in May 2007. Provision of mortgages with low interest rates will make housing more affordable and cause house prices to head upwards. The government of Turkish law was passed in January 2006, and confirmed the right of foreigners to buy property under 2.5 hectares in size for personal use or business. It is now possible for foreigners to obtain a local mortgage, further encouraging this emerging market.

Strong Resale Market
Turkey is getting richer, and house prices will grow accordingly with the increasing wealth of the country. The Turkish economy grew by 9.9% in 2004 alone, the highest recorded growth that year within an OECD country. Morgan Stanley's global economics team believes the Turkish economy will continue to outperform the rest of the world, as the growth rate of real gross domestic product (GDP) accelerates from 6.2 percent in 2005 to 6.5 percent in 2006 and then on to 6.8 percent in 2007. Turkish population growth is around 2% per annum with 70% of the population younger than 30, and this is creating a very strong local market with good purchasing power. Investors would not be reliant on international investors for re-sales, hence strong internal property market demand should increase.

Foreign Investors
Turkey has received a large amount of foreign investment. This investment is being used to rapidly improve Turkey’s infrastructure. Property funds based in Europe and the Gulf are also pouring money into the country, with Dubai a particularly heavy investor in Turkey as an attractive destination. Corporate investors are creating new resorts, golf courses and other tourist facilities, while public funds are targeted at improving roads and airports. These are clear indications of a growing tourist economy that will greatly boost capital growth for today’s property investments. Huge golf tourism is evolving in Antalya-Belek, which will increase the value of any investment in that region.

Strong Buy to Let market
Over 25 million tourists visit Turkey each year, boosting the property market and creating strong "buy to let" possibilities. Gross rental yields in Turkey vary from moderate to high. Properties in major city centres offer yields of 7.6%, while property in coastal areas can yield from 13% up to an impressive 16%. The low cost of living and affordable and frequent flights from most European cities are making the country an easy place in which to have a second home.

All in all, Turkey has a great deal to offer to buyers, be it for investment, retirement or just a holiday home.

Those looking to capitalise on property investment in emerging markets should be keeping a close watch on Turkey. Turkish property prices are drastically pushing up and up, with capital growth strong at 25%. There is a steady stream of demand for property by local people - after local mortgages were introduced in February 2007 enabling investors to borrow up to 80% of the value of the property.

Added to this, the liberalisation of the real estate market in 2003 attracted international investors to Turkey, regardless of the issue of EU accession. The United Arab Emirates will invest 4.4 billion Euros in the Turkish real estate sector, UK-based Fund Managers and large real estate developers both include Turkey in their residential property investment. Major European, USA banks and investors have gradually established a physical presence in Turkey by locating branch offices there.

Property values have in many places increased by in excess of 100% and in some city centres properties have increased by as much as 150%-200% since 2003. The sales of property in Turkey have exploded and over 21,000 buyers from the UK, Ireland, Germany and Holland have invested in property along the Turkish coastline.

The Country's property market has seen an increased supply of extremely high quality property developments, especially in major costal areas and cities. Six million new homes are expected to be built in Turkey by 2016. The Turkish banking system was not prepared for this growth, and has no real estate financial tools and lacks the capital to finance the real estate business. Eventually The Turkish Government has reacted to these problems, and approved a new mortgage law in February of this year, which is expected to be enacted by May (2007). 70% of a young population of hungry buyers will be in the market for their first houses. It is predicted that Turkey's annual housing loan market could swell to as much as $60bn annually when the mortgage system begins operating at full swing.

Capital growth projections are around 25% per annum, however popular coastal areas with big letting and resale potential such as the Bodrum Peninsula are predicted to have 40-50% capital growth over the next 2 years. In some cases and locations, we have been able to negotiate preferential prices for bulk purchasing investors with a 30%-40% discount on the property prices.

Turkey - with 25% per annum Capital growth on property and an average 7.6% rental yield is indeed a very promising region in comparison to most of the Western European and some East European countries.

Converting a set of 1870's houses into a modern and highly desirable residential shopping area, replete with chic cafes and a 5 star international hotel is no mean feat. This week however saw the rich and cool of Istanbul flocking to either see their new homes or to mingle and be seen at a flurry of gala openings in the Akaretler development.

Originally built for the workers and servants of Dolmabahce Palace, the Akaretler Row Houses are one of the best examples of the civil architecture of the 1870's, with their neoclassical frontal design lacking the influence of earlier Baroque and Rococco styles. Most of the houses are 3 floors high.

The road steeps up towards the oh-so trendy Nisantasi district, with it's numerous clubs, bars and restaurants - not to mention the newly opened City's Nisantasi shopping centre. The Akaretler development is located nearer the bottom of the slope, however, where the bustling Besiktas area can be found.

The building complex has been transformed into 44 office buildings, 39 apart-hotel units with 184 beds, 34 commercial units, three restaurants/cafes, a luxury office unit, an administration center and a club building. In addition to those above, a multi-floor car park will be constructed on the land adjacent to the site.

Istanbul's newest top-end hotel - the W - is also located here. Taking pride of place at the corner of the designer shopping arcade and housing area, this hotel is the chain's first European venture. With its Turkish flourished decor and dark lighting, it feels more like a local boutique hotel than part of an international chain. (See images below.) Though there is a branch of Jean-Georges Vongerichten's Spice Market inside as an upscale alternative to the city's ubiquitous kebabs and baklava. The restaurant and some of its rooms have views of the Bosphorus.

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