2020 saw a booming property market in Istanbul. Earthquake fears, low interest rates, and government incentives all fed a credit fuelled buying frenzy. So what exactly happened in 2020, and what can we expect to see in 2021?
With interest rates at an all time high, at the start of 2020, nearly 25%, investors preferred savings accounts. This caused a slowdown in local demand, ensuring a marked decrease in prices during 2019. A small earthquake at the end of 2019, changed the mindset of investors and homeowners. 2020 started with homeowners looking to upgrade their old non-earthquake proof homes to modern apartments (note Turkey only introduced the Earthquake construction laws in 2004). This caused quite a stir in the brand new and off plan property market. The end of 2019 saw a gradual decrease in the Central bank’s interest rate, from an all time high of 19.75% in July 2019, to 12% by the end of 2019. By the end of 2019, the property market had reversed most of its losses.
Central bank interest rates
With a sliding economy in 2019, the Turkish central bank continued to reduce rates at the beginning of 2020. However, the pandemic at the beginning of 2020 and the resulting lockdown saw a sudden halt to the entire economy of Turkey. With the number of Covid-19 cases reducing, the lockdown came to a gradual stop in summer 2020. With this, the government felt the need to put a jolt into the economy. Interest rates came down drastically - from 12% in January 2020, to 8.75% by June 2020. The government didn’t stop there - they offered payment free mortgages to the Turkish consumer, with zero payments for the first 12 months of the loan. This was offered with most state as well as private banking organisations. In addition these were only made to brand new property, under construction or completed within the last 12 months. Stock levels in good locations never fell quicker.
Interest rates now sit at 17% as of Jan 2021.
January 2020 - low stock levels
Today “central” Istanbul stock levels of brand new apartments are exceptionally low, and demand is expected to increase. The Izmir earthquake in late 2020 as well as the pandemic, has focussed the mind of many Turks. Suburban parts of Istanbul, where stock levels were always too high, and demand too low, continues to suffer from the same historic problems.
What we expect in 2021
City centre - Sisli and Besiktas
The traditional "central" parts of Istanbul, Sisli, Besiktas, Kadikoy, Bakirkoy, and Zeytinburnu, suffer from undersupply of brand new property. This chronic undersupply will continue into 2021 and beyond. "New" high rise permits in Sisli are now very difficult to come by, whilst in Besiktas, Zeytinburnu and Bakirkoy, high rise permits were never given beyond 15 stories. This height is expected to be even harder to come by in 2021. The Greater Istanbul Municipality (IBB), coupled with the Turkish government, prefer "horizontal" architecture as a solution to the overly dense nature of today's Turkish neighbourhoods. Sisli and Besiktas saw average price rises of 18% and 23% respectively over 2020.
Istanbul’s premier business district starts in Sisli (pronounced Shishli) and extends North to Mecidiyekoy, Levent, 4. Levent and ending in Maslak. Sisli is prime city centre and in exceptionally high demand for residential and commercial space. Development in this region is rare and usually quite expensive as vacant land no longer exists.
Bomonti is a region which was a ghetto just five years ago. Today, it is an elite residential region, with skyscrapers like Anthill, Divan, and Bomonti Hilton (the largest Hilton in Europe). The residential towers average in excess of $4,000 per square metre.
Bomonti's popularity gained with the construction of two road tunnels, one which leads directly to Besiktas, and the other leads up to Kagithane. Two very important tunnels. In addition, Taksim is 9 minutes away, Nisantasi (a very elite area) is a 10 minute walk away, the Taksim metro (M2) is a five minute walk. Bomonti today is an important, yet still growing region.
Expect these areas to out perform 2020.
Kagithane - Seyrantepe - Istanbul’s rapidly expanding technology district
Whilst most people know Seyrantepe due to the famous mall, most people are not aware of it being called Seyrantepe. International buyers are miscommonly told this region to be Maslak or the Vadi district. These two zones are gradually merging, along the Cenderre river banks. Starting in Seyrantepe, incredible developments have cropped up along the river, working its way south towards the Halic river. Whilst prices have topped out in Seyrantepe, moving further south offers an opportunity for real value. On average, prices increased by 22% in the district.
While the new M7 metro line opened in Q4 2020, the pace of development has quickened now that the potential of the new line is realised. The M7 metro line runs east from this region into the city centre at Sisli, and terminates at the Bosphorous in Besiktas. This line is of crucial importance to Istanbul as it will be the first East to West metro line link for the city centre.
The new Airport is also easy to access from this region, with a direct highway link from Kagithane to the airport - the D020. The airport is to be served by a metro line due to open next year, and with a station in Kagithane (M11 Gayrettepe - Istanbul Airport metro line).
Expect Kagithane to perform high double digit growth throughout 2021 in areas outside of the prime regions - i.e. urban regenaration areas outside the Vadi Istanbul mall region.
GOP and Eyup
Districts which line these central districts are expected to pick up the slack of the city centre. Regions like Eyup and Gaziosmanpasa provide easy access to city centre locations. Government expenditure on metro lines, the most recent being the M7 metro and T5 tramline, has seen even more private investment in these areas. These districts have plenty of space for further construction. Couple this with extremely unsafe stock under "urban regenaration" orders, and a decent supply of mid range property will continue to feed the market. GOP saw prices rise by 20.44% and Eyup saw increases of 31.13% in 2020. Expect both regions to continue this heavy growth in 2021.
Coastal route - Atakoy, Bakirkoy, and Zeytinburnu
The coastal route provides enticing sea views as well as excellent transport links to all parts of Istanbul. The region also provides a fantastic lifestyle to residents with excellent and varied amenities of all kinds. These regions are prime for the upper and middle classes.
The front line has seen heavy development of mega compounds - these are without doubts future landmarks of Istanbul. These provide full uninterrupted sea views across the Marmara sea, the Prince’s islands, and across the historic peninsula. They are once in a generation developments, with no further land remaining for compounds of these kinds.
The uber modern Marmaray train line provides high speed access to all parts of Istanbul, and runs without interruption under the Bosphorous, the Anatolian side, and all the way to Ankara as a high speed trainline. This has made these regions even more attractive to frustrated commuters.
Despite being in the upper bracket in terms of price, these developments are prime for investment. They will be easy to rent, and with strong demand from the local and international market, the resale value will always be there. Supply however is quickly running out as most compounds have completed, and are more attractive to the end user. Further supply and permits will be extremely hard to come by, resulting in strong capital gain in 2021.
Bakirkoy saw prices rise by a whopping 31.62% and Zeytinburnu by 22.99% on average. We are not expecting rises beyond these figures in 2021, as prices are already at a premium.
The crossroads of Istanbul - Bahcelievler and Topkapi
These regions are always attractive to the middle classes of Istanbul. Providing easy access to the E5 means multiple transport options to all parts of the city, but most importantly to the city centre and business district. The region is traditionally heavily dense, with narrow streets, and lack of underground parking the main issues.
This changed over the last five years, with old warehouses and factories moving to the suburbs of Istanbul, large compounds have replaced them. This has driven growth in the area, with prices remaining reasonable considering the location. The regions averaged a price rise of 18% in 2020.
The region is quite mature, and no new government investment is expected until before 2023 - hence prices may remain stagnant in 2021 and indeed 2022. Good capital gain can be made in off plan projects.
Media Highway and Atakent
Moving further west, "Media Highway" (Basin expres), continues its regenaration apace. Three metro lines, one which opened in 2020 (M7), continues to fuel heavy construction around metro stations. This planned government expenditure on rail lines is a welcome respite from the older planning of build the homes first and then the infrastructure. An approach which has caused Istanbul's infamous traffic issues. Today, Media Highway provides ample stock - but expect this stock to dwindle once the M9 and M3 metro lines open. Both are expected in early 2022.
Key facts about this crucial region:
Media Highway currently has around 20 developments from the cheap to the expensive, under construction to recently completed.
Atakent and Halkali in Kucukcekmece has always been a safe haven for the middle classes. Its rapid expansion throughout the 2010s out of Atakoy has transformed rocky land into a paradise of compounds, private schools and hospitals, many malls, and excellent infrastructure. Today, Halkali is the terminal for the country's national and international high speed train network, as well as Marmaray, M1a metro, and the new Istanbul airport M11 metro line. This is further fuelling demand for what is a prime example of what proper town planning can do in Istanbul.
The districts of Media Highway saw the following average rises - Bagcilar : 19.46%; Kucukcekmece : 35%; Bahcelievler : 18%. We expect exceptional growth in price rises in property that is located within 800 metres of a metro station - especially Halkali.
Basaksehir and Bahcesehir
These two regions are investor favourites, but the important attributes of location, early phase of construction, and brand name builder, are very important here. This combination ensures resales are always fast, for a quick exit route no matter what the market conditions. The cheaper options will never provide a decent return, and resales take traditionally longer in my experience. In recent research, we found that return on investment levels reached 30 years, making it much more logical to rent in the region then buy.
Basaksehir and Bahcesehir are the closest satellite towns to the new airport, with a government objective of growing both into a population of one million plus. Parallel to this plan is to grow it with a master-plan - hence the broken thinking of the past of building first, bringing infrastructure later, is not in place here. Basaksehir is home to one of Istanbul's biggest malls (Mall of Istanbul) and Istanbul's biggest state hospital (3,000 beds). The metro linking the region to the city centre is already operational with construction for expansion already having started. Bahcesehir also has a metro construction linking it to the city centre at Sisli. These are all large scale public and private investments adding up to billions of dollars.
Basaksehir saw a whopping 50.36% price rise in 2020. This rise surprised all but has resulted in exceptionally high prices for what is primarily in internationally driven region - we expect prices to rise by single digits, or even reverse in 2021.
Esenyurt and Beylikduzu - Western suburbs of Istanbul
These two areas continue to suffer from two very important problems - Poorly planned infrastructure, with no plans for improvements; and over construction, with too many permits given by the local municipalities. This combines to form an oversupply for two districts where most professional middle class Turks do not want to live. The poorly planned infrastructure and lack of public transport has caused a bottleneck in traffic at the Kucukcekmece lake. The traffic here at peak times can cause waits of over one hour.
The serviced apartment and branded complexes are the safest concept in this region. This is where a management team will be within the complex, and this is generally available on projects built by major developers. The smaller developer does not have the experience or know how to provide this type of service - this does not mean small development, but the type of developer that set up fairly recently and would not have the knowhow.
Esenyurt saw an average price rise of 28%, and Beylikduzu a rise of 45% in 2020. Much of the rise in Beylikduzu has been driven by "branded" projects in Yakuplu and Beykent. Standard buildings have not seen the same rises. We don't expect either region to match this growth in 2021 - and we may even see reverses. As with all areas of Istanbul, the majority of this boom is credit driven - with rates now at a high of 17%, we would be very suprised at these levels being sustained in 2021.