Investors care less about Turkey’s chances of achieving EU accession than they did a few years ago. But why?
During the recent overseas property boom, which was in fact the first ever overseas property boom, we saw EU membership drive up prices, rental rates and investment returns in a slew of new members including Estonia and Bulgaria. Because of this we saw the prospect of EU membership on the horizon causing similar growth in countries like Albania and Montenegro. Unfortunately this was at the expense of Turkey which looked far less likely to achieve accession.
Now the EU economy is growing at a fraction of the rate of Turkey’s, embroiled in a sovereign debt crisis that few would ever have dared believe we’d see, banks up to their eyeballs in bad loans, and investors having to look harder than ever to find good opportunities.
According to the Turkish Association of Real Estate Investment Companies (GYODER) sales of Turkish property grew 40% year on year in 2010, strengthening the view that Turkish property is benefiting from the fading necessity of EU membership.
Turkey’s application to join the EU was eventually accepted in 2005 but it has never really looked like achieving full membership. France and Germany are opposed to Turkey becoming a full member, and for the last 6 years both have waved their unofficial vetoes in one hand, and the offer of a privileged partnership in the other.
So Turkey has kept on losing out. Bulgaria and Romania just missed the cut in the 2004 expansion and so they were investors’ favourites in the run up to their accession in 2007. Then Ukraine, Montenegro and Albania were the favourites, because they had seemingly more straightforward paths to accession.
Now the EU is embroiled in a sovereign debt crisis: Greece, Spain, Portugal, Ireland and Italy all have massive budget deficits, two (Ireland and Greece) have been forced to ask for bailouts from the IMF and EU, and all are facing the necessity of imposing harsh austerity measures on their respective populations.
Greece has been forced to impose new taxes to its high end property market, on both sales and ownership. As a result many foreigners began trying to sell up, but the taxes combined with the dire state of the Greek economy meant few buyers to market to. Of course there will always be your hardcore Greek fans; thousands of which are currently watching and waiting for prices to come down far enough for them to bite.
Portugal has been advised to bring in similar property taxes, and both Greece and Portugal have been downgraded by the ratings agencies since the sovereign debt crisis began.
In those three and in the European Union as a whole growth remains sluggish as they struggle to crawl out of recession. In the first quarter of 2011 EU GDP was up just 2.5% compared to the previous year, Turkish GDP grew 11% during the same period to become the fastest growing economy in the world.
Turkey is one of the few countries in the world to have had its debt upgraded by the ratings agencies since the downturn began.
It is easy to see why investors care less about Turkey’s chances of achieving EU accession than they did a few years ago. Rather it is a case of Turkey being one of the best investments in the world, and investors seeing it as such in its own right, independent of its links with the EU.
This change has been taking place slowly since 2009, when Turkey began making a series of diplomatic offensives, which resulted in 12 free trade agreements, a “strategic alliance” with Brazil, and visa-free travel deals with Russia, Serbia, Sudan, Libya, Syria, Lebanon, Jordan and many more.
Last year the well respected property website Global Property Guide published an e-report titled “Turkey: Europe’s Best Residential Property Investment?” The report was accompanied by an article titled: “Turkey: a Housing Boom Ready to Roll?” Both detailed how Turkey property — currently among the lowest priced in the world — is undervalued and presenting good investment opportunities. Amen to that.