The recent coup attempt in Turkey should not dampen investors’ long-term interest in the world’s leading residential market in terms of price growth, experts say.
The country’s political instability, enhanced by last weekend’s failed attempt by the military to unseat President Recep Tayyip Erdogan, may slow sales activity as investors adopt a wait-and-see attitude and monitor the economic direction of the nation, said Kate Everett-Allen, head of International Residential Research at real estate consultancy Knight Frank.
However, the longer-term outlook remains positive, Ms. Everett-Allen said.
“In the long-term, Turkey is likely to remain on the radar of investors, given the underlying market fundamentals of strong demand set against low supply,” she said.
That mix has landed Turkey at the top of Knight Frank’s Global House Price Index for four consecutive quarters. Home prices grew by 15% in the first three months of 2016 compared with the same period in 2015.
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Istanbul, individually, is also a top-performing housing market. The city ranked third on Knight Frank’s Global Residential Cities Index for the first quarter of 2016, with a 19.6% increase in housing prices in the previous 12 months.
Nevertheless, other factors, including Russian sanctions and mounting pressures on the Turkish lira, still cast a shadow over the residential market, according to Knight Frank. While house prices grew by 15% in the first three months of 2016, they had moved at a faster annual pace, 18%, in the last quarter of 2015.
Following the failed coup, the Turkish lira fell almost 5% against the U.S. dollar on Friday, its biggest one-day decline versus the greenback since 2008, although it has since stabilized as the government reasserts its power.
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And while residential sales in Turkey increased by 6.4% to 114,800 units in May, compared with the same month in 2015, according to the latest data from the Turkish Statistical Institute, sales to foreigners have been falling.
Foreign buyers purchased a total of 1,612 properties in May, an 18.7% year-to-year decrease, according to the official data. Iraq was the main source of international activity, followed by Kuwait, Saudi Arabia, Afghanistan and Russia.
Still, the outcome of the failed coup could be seen as encouraging by would-be buyers.
“The people and the establishment won the battle in less than 12 hours,” said Yener Coşkun, a real estate expert at the Capital Markets Board of Turkey in Ankara. “This victory of democracy will create extra positive impact.”