Last weeks Turkish election results certainly shocked a great many people including ourselves. It’s only now, a few days later, that we are starting to see a glimpse of what our new parliament has planned for the country.
The past 12 months have been tough for Turkey. Since the Justice and Development party (AKP) lost it’s Turkish election majority leadership on June 7th of this year and the Prime Minister Ahmet Davutoglu failed to form a coalition with the opposition parties, the economy, real estate industry and tourism has suffered no end. This, alongside the Syrian refugee crisis and a spate of terrorism really paid Turkey no favours. The exchange rate against the Dollar, Euro and Pound reached an all time low. But on a positive note, the controversial snap election of November 1st, resulting in Recep Tayyip Erdogans AKP party gaining single party leadership once more, should at least mean that some kind of order and stability will be restored.
It will take time for many people to regain confidence in Turkey. But it’s important to remember that for eleven years the AKP did keep Turkey afloat. During the last decade the Turkish economy improved dramatically peaking at a GDP of 9.3% in 2010, a time when much of Europe and many global markets were engulfed by the financial storm. Turkey became a hot spot for investment for many years and tourist numbers grew no end. Turkeys infrastructure improved, new airports are being built, Istanbul’s 3rd main bridge, many antiquated laws regarding who could buy and invest in Turkey were relaxed and house prices rose consistently year on year. In-fact, the latest Economist House Price Index states that Turkey has still ranked high in terms house price growth during the past year. It closely follows Hong Kong’s 20.8% with property values reportedly up an amazing 18.8% despite the countries difficulties.
So let’s look at a few of the positives. Since the November 1st result the Turkish Lira has begun to regain value. In a report published by the Financial Times last week, Turkish Finance Minister Mehmet Simsek is quoted as saying that “we are looking at a large set of changes we can now make because we now have political certainty“. Although Simsek said that due to legal procedures the new government management of economy and his position is still unknown, he is aware that there are a number of positive reforms in the pipeline. The government are intending to focus on boosting tax collection, competitiveness, employment, pensions and personal savings. The minimum wage in Turkey is set to be raised in 2016 and he also mentioned that measures will be taken to deepen capital markets inside the country. The FT reports Simsek as believing that “reforms will aim to bring the current account deficit – widely seen as the country’s Achilles heel – under control by focusing on core issues of domestic consumption and increasing high value exports“.
“Turkey’s political situation since June certainly did have a negative effect on the countries economy and real estate market. During this time, some of our investors did express concerns about purchasing property here given the political climate and deteriorating value of the lira. A few clients said they would rather the political circumstances were clearer and the economy more stable before they chose to invest. On the other hand, we did see an increase in sales and enquiries from Turkish buyers living abroad and Arabs. Many saw the low value of the lira as an opportunity as they could get far more for their money.
The AKP win was a shock to many, but it has happened and Turkey does now have a government. It’s pointless dwelling on what could have been should the results have been different. What’s important now is that the economy does appear to be regaining strength and the value of the lira is now on the way up. I do believe many of the planned AKP reforms will help boost the economy and restore confidence in Turkey. This should help reassure real estate investors that Turkey is once more a viable option for investment.” Suleyman Akbay, Oceanwide Properties.
What are your thoughts? Please comment and let us know.
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