Istanbul Boils Over – Should Property Investors Be Concerned?

Turkey PropertyNothing lasts forever they say and that includes construction booms. Most of the time these building frenzies grind to a halt, burning themselves out to a gentle flicker when property markets overheat and supply weighs more heavily on the property market seesaw than demand.

In Turkey this week we have seen an altogether different force at play which threatens to stop Istanbul property development in its tracks.

Plans to bulldoze more trees in Istanbul’s Gezi Park lit the fuse for what has become a backlash against redevelopment in the city and also some other more serious political issues that have been bubbling away below the surface.

With the exception of threats on its borders from Syria, Turkey has, until now, enjoyed a good year. Its credit rating has been lifted and international investment in property, particularly in Istanbul, has increased.

Turkey has even been suggested a safe haven for investment money.

The problem is, there had to be a price paid for all this somewhere along the line and it has come from a quite unexpected source. The people themselves.

Like two sides of the same coin progress can bring out the worst in populations just as much as when things are going into reverse.

In Europe we have seen rioting due to recessions and falling living standards, in Turkey we see rioting against the construction of new shopping malls.

It has to be said that the people of Istanbul have a point when it comes to dealing with dramatic change in their city. Nobody wants to see green space bulldozed without good reason.

Turkey had just 46 shopping malls in 2000, now thanks to a young aspirational population who want the latest designer labels and the same choices people enjoy in Western European cities, that number has increased to 300.

Istanbul has become the flashpoint because it is the engine room of economic growth that has seen Turkey rise from an unstable country struggling with rampant inflation to one of the fastest growing economies in the world.

In a city that needs to satisfy this new image of a thriving economic powerhouse there are further plans in the pipeline that threaten to dwarf the bulldozing of Gezi Park.

Turkey’s Deputy Prime Minister, Ali Babacan, has already announced that work will begin on a new canal project that will connect the Black Sea to the Sea of Marmara with the aim of easing congestion on the Bosphorus.

According to rumours this is sending property prices nearby soaring as it will for those who own property close the Bosphorus which will become a haven for water sports rather than a clogged up shipping highway.

The environmental impact of joining two seas together will potentially be huge – particularly on marine wildlife – and going by recent events, extremely unpopular with angry citizens.

So as the cleaners arrive to sweep up the mess from last week’s protests, the Turkish government will have some food for thought on how it can push all these projects through without putting the political stability the country has enjoyed at risk.

Credit reference agencies are unlikely to keep rewarding a country investment grades when people are regularly rioting on the streets.

For property investors, on the other hand, assuming the Turkish government can get to grips with protests and find a solution, it looks like a win win.

Slowing down construction could see land and property values rise with demand clearly still outweighing supply of offices and living space in Istanbul.

If Istanbul pushes ahead with its dramatic infrastructure projects, the only way is up for property prices close to where they are taking place.

What are your thoughts on construction in Istanbul? Has it gone too far?

Kind regards

Brett Tudor
Property Expert

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