An Analysis Of The Opportunities And Weaknessess Of The Turkish Real Estate Market

Home ownership levels accounting for more than two-thirds of all households in Turkey. Real estate is one of the leading and traditional investments for Turkish household due to several reasons. 2003-2007 period would be accepted as the boom period for Turkish economy in general and real estate sector in specific, as well. Rising residential prices, increasing the volume of residential and shopping center, growing foreign direct investment to domestic real estate market (particularly for commercial real estate investments) and growing production in social real estate market (by TOK›, Housing Development Administration of Turkey) are the pozitive signs of dynamic real estate markets in this period. In addition to this remarkable periodic market movement, there are lots of reasons for strong housing demand in Turkey (i.e. young population and inward migration, renovation investment needs, growing affordable housing and high-end apartment demand etc.) which is important for long term development for the market. Although relatively higher economic growth and strong domestic and international residential/commercial real estate demand are the positive sides, Turkish real estate market is of important deficiencies. At first, however there is no significant infrastructral problems (i.e. legislative infrastructure, secondary market know-how etc.) at the market operation, unable to work of mortgage finance is the reason of the rising cost for households, creditors and construction firms. Therefore, residential and commercial market players have no access to capital markets through various financial instruments and intermediaries. Related to this problem, highly dependence of credit markets would be a reason of finance shortage in the time of slowing economy. Secondly, however real estate is one of the important investment instruments for Turkish household (and for economic growth in general), investment enviroment is extremely weak for real estate in terms of data availability, real estate valuation process (for mortgage purposes) and consumer protection. In this context the problem of data acquisition and absence of real estate index result in transparency problem in the process of pricing, valuation and hence overall investment process. It is important to note that this non-transparent structure would hurt the process of rational decision-making in the real estate investment for all market players. On the other hand land shortage in the urban area and complexity of zoning law practices may also cause valuation problems in real estate projects and operational risks for the investors. In this paper, the author is questioning whether deficiencies will decrease the potential value of the oppurtunities of the Turkish real estate market in the short term and what kind of measures would be taken for the healty developments. In this context, in the case of Turkish real estate market, the author is also discussing the elements of potential valuation problems in the market and management of the potential local risks.