Istanbul: A growing buy to let market

As Turkey’s major city, Istanbul is the country’s economic and cultural hub. It is also increasingly on the ‘go to’ list of international investors looking to buy residential property that they can rent out. The sixth largest city in the world, Istanbul was also ranked twentieth in PWC’s Emerging Trends in Real Estate Europe 2015 report, and was described as a market to watch with a lot of growth potential.

A city in transformation

Beylikduzu is the flagship district for Istanbul’s transformation into a contemporary, international city with a competitive infrastructure, and rents in the area have increased nearly 40% in the past two years. Home to five universities and a marina, Beylikduzu is known as an upmarket, upper middle class neighbourhood, as well as a cultural melting pot. The events of the Arab Spring have caused investors to see Istanbul as a safer and more appealing location, and since 2014 property sales to foreigners have increased by 55.6%, and are still rising.

Rapid migration is driving the market, and the growing population of the city has obvious potential for overseas investors. Outside of the central business district the price of property is still cheaper than in comparable European cities like Prague, Budapest, Bucharest or Sofia.

A student centre

The pool of potential tenants for those buying residential property to let includes not only a large number of transient workers but also Istanbul’s expanding student population. As land prices have prevented new halls of residence being constructed at a rate that can keep up with demand, Istanbul’s students are forced to look for housing off-campus. The Turkish government also intends to increase its international student market by 500% over the next ten years, which will obviously be good news for owners of residential lettings in the university areas.

Where to invest

Adil Yaman, director of Turkish property firm Universal 21, advised investors to avoid buying in tourist areas as the prices were already too high. He suggested that buyers should look for property in up and coming districts, close to local amenities, shopping centres and metro links. The latter is important, he says, because Istanbul is an expensive city in which to own a car and as a result most locals rely on public transport or travel on foot.

Young people make up a large and growing part of Istanbul’s demographic, and rather than pay the high taxes on petrol, younger locals are more likely to spend their money on renting a well furnished apartment in a desirable neighbourhood, Mr Yaman claimed. He suggested that studios and one-bedroom apartments offered the best growth potential and the highest yields.

Cusman & Wakefield’s report, ‘Main Streets across the World 2014-2015’ found three Istanbul thoroughfares in the top ten streets in the world for rent increases. Foreign investors from Europe, the Middle East and elsewhere purchased 18,959 properties in Istanbul during 2014, according to the Turkish Statistical Institute. Overall, this points towards Istanbul becoming a major location on the international property market, with signs of continuing growth in years to come.