Turkey and Northern Cyprus Still Represent a Sound Property Investment

Richard Powell tackles the property potential of one of this year's capitals of culture, Istanbul, before nipping across the Mediterranean to experience Turkey's sunshine state, Northern Cyprus.

Getting about by road in Istanbul is tricky right now as the city is working to modernize its metro system, and reduce its choking twenty-four hour traffic by half.

It's a pain for visiting tourists taking cabs, and undoubtedly worse for commuters, but a delight for historians who have uncovered objects beneath the ground thought to be the oldest signs ever of civilization on the continent.

There are 8,000-year-old graves, sunken ships, jewelery, combs and sandals; so many artifacts in fact, that a new museum is about to open to showcase them at Yenikapi.

On top of this ancient ground, however, still sits the remainder of tumbledown properties that escaped the last big earthquake here in 1999, where an estimated sixty percent of housing is deemed to have been built illegally or considered unsafe for living.

But among this ramshackle landscape and the Ottoman mosques and Byzantine churches nestled therein, a new renaissance of ultra-modern glass, concrete and steel towers are springing up to cater to the city's burgeoning and increasingly affluent population.

Istanbul has some 13 million inhabitants with an average age of just 28, making this Europe's fastest growing city and Turkey's economic powerhouse. Over 400,000 new residents arrive each year to work or study and more than a quarter of a million new homes are required each year, for the next five years, to accommodate them.

The explosion of new money in this city can be seen through the plethora of luxury goods shops, plush nightclubs, and luxury apartment blocks springing up across either side of the Bosphorus.

A new 1,700-unit housing complex called Tulip Turkuaz is a case in point. It's a joint venture between two Turkish government quangos (Emlak Konut and TOKi) and a Dutch construction firm (Van Herk Group) going up in the Bahcesehir district of Istanbul.

Prices start from $75,000 for a one-bedroom, 70 sq. meter apartment to $310,000 for a four-bedroom apartment at 290sq. meters. A guaranteed net rental yield of six percent per annum for the first five years of ownership is available with a choice to opt-out and switch to a rental management firm after three years.

The process of purchasing property in Istanbul is relatively straightforward, with no restrictions on foreign ownership. So far, half of this development has sold to domestic and foreign buyers. Guarantees of construction completion underwritten by the Turkish government provide assurance to cautious overseas investors.

David Richardson, of Property Sun Turkey, is handling sales for this and other regional developments in the UK. He has been doing business in Turkey for 15 years, typically selling mid to high-priced holiday homes of $230,000 to $770,000.

"Property prices are undervalued so there's an opportunity to make good money in Istanbul -- up to 40 percent profit -- in the next two years for a well-chosen off-plan investment," he says.

The Financial Times has listed Turkey as one of the top ten place to safely buy residential or holiday homes. Price Water House Coopers and the Urban Land Institute rank Istanbul as the number one City Development Prospect in 2010.

Confidence in the country is at an all-time high because while Europe was mired in recession and its neighbor Greece was on the brink of bankruptcy, Turkey's economy grew six percent.

Some of this money has been filtering down into a number of local initiatives, including an extensive program of restoration around Istanbul, polishing everything from traditional wooden Ottoman houses to tombs, fountains, bazaars and other well-known sights, as well as essentially, the city infrastructure itself.

Northern Cyprus

The Turkish Republic of North Cyprus, so-called since the Turkish military intervention on the island in 1974, still sees UN troops manning the Green Line border separating north from Euro zone-south.

Visitors must first land in Turkey under international law before flying on to Cyprus's divided capital Nicosia, adding two hours on to what would otherwise be a four-hour direct flight from the UK. From there it takes 30 minutes to reach the main TRNC resort of Kyrenia by road.

This resort, in Turkish-occupied northern Cyprus is dotted with new developments, from holiday homes for British families to upmarket golf courses and extravagant Las Vegas-style casino resorts for Turkish and European tourists.

The sun shines here 300 days a year, so you can even visit during the depths of the British winter and you will be guaranteed sun. Not only are there plenty of options to choose from, with beaches and pretty villages set amongst a spectacular landscape. It's also how the Mediterranean used to be.

The area is good value for money too, as North Cyprus uses the Turkish Lira, making this Euro-free zone even more attractive. Now tourism has taken over, and British ex-pats love the widely-spoken English and that you drive on the left-hand side.

While the global downturn has seen a slew of construction projects in the region abandoned or put on hold, development is picking up again quickly, not least because TRNC didn't have any foreign debt it could default on, unlike the ailing emirate of Dubai.

As such, British property developers, Israeli investors and Turkish construction companies are bringing a mass of both commercial and residential properties onto the market this year.

The TRNC government is also rolling out an ambitious campaign to make the area the key tourist destination of the region, as well as a world-class international exhibition and conference hub and European healthcare center.

Ersan Saner, Minister of Tourism, Environment and Culture, says despite the downturn, year-on-year visitor numbers were up one percent on last year because of investment it had made in its world-class corporate conference facilities.

"Thanks to these facilities we received half a million visitors last year, while numbers dropped markedly elsewhere in the region. As well as continuing growth in this area, we will now concentrate on boosting tourism through a range of new initiatives, including wildlife conservation and a huge network of cycle paths. We're expecting tourist numbers to leap between 5-10% this year, up to 1.3m per year, after that."

The minister's bullish attitude is riding at the forefront of an aggressive campaign to draw in major tour operators and appeal to entirely new sectors of tourism include providing healthcare under the draw of the island's year-round warm and sunny climate.

"We are targeting countries in northern Europe, particularly during the winter," he adds.

Mr. Saner is dismissive of claims that the Turkish, US, British and United Nations military presence in the area could act as a deterrent to tourists, or that the inconvenience of having to first land in Turkey before flying on to Northern Cyprus could put elderly healthcare patients off coming.

"Do you see soldiers walking around on the streets," he asks? And, in all fairness, you mostly do not. In fact, many of the barracks dotted around the landscape look deceptively abandoned, by day.

Other environmental initiatives being rolled out include plans to provide green energy to the entire region. The TRNC is working with Israeli firms to roll out desalination plants to irrigate its often parched land, transforming huge swathes from dust into rolling green golf courses.

But it's not just construction and environmental firms looking to capitalize on Northern Cyprus's rapid development. Finance is nudging its way in too.

The TRNC's Economy and Energy Minister, Mr Sunat Atun, says a major US insurance company that is already operating in the south of the island recently applied to his department for a license to open in the north; and, major banks are flocking to the area to offer both domestic and international buyers payment plans and mortgages on off-plan property.

The minister, who only joined the region's government some nine months ago after a career in shipping, says the isolation the north of the island has endured since the 1974 invasion continues to hit local businesses hard. But he is confident its current surge in interest and investment opportunities will finally allow it to leave this difficult period in its history behind.

In 2003, travel restrictions between northern and southern Cyprus were eased, enabling people to cross the border for the first time in nearly 30 years, raising hopes that progress might be on the way.

As EU entry approached, a revised UN reunification plan was put to both communities in twin referendums in April 2004, and even though the north voted for reconciliation with the south, and the south voted against it, the increase in diplomacy saw an immediate boom in construction and property sales.

"Turkey is undoubtedly being held to ransom over Cyprus by the EU," Mr Atun adds. "But every year now is better than the one before, and the more international support we can gather, the faster we will be able to progress."

Meanwhile, domestic residents are snapping up properties as fast as they can under an initiative backed by the mainland Turkish government that lends a helping hand to Cypriots who otherwise risk being priced out of the market by wealthier expat buyers.

"Credit is a new concept for Turkish Cypriots," one local property saleswoman explains. The big players here are now the likes of BNP Paribas and Dutch Ambro, whereas before, local buyers could expect to have 5 or 10-year payment plans from the construction company.

"A shift towards mortgages meant many were getting squeezed out, so the Turkish government stepped in to offer preferred mortgages to Northern Cypriot nationals so they could compete with foreign property buyers."

"Homes here are as cheap now as they ever will be," the minister says, who like everyone else in the region is expecting this year to bring yet another steep hike in prices.

Soner Yetkili, Head of the North Cyprus Developer's Association, oversees the standard of construction carried out in the area. He says premium land, especially beach front plots, is being snapped up by developers as quickly as it is being made available.

Meanwhile, private and state English and Russian schools are popping up in these areas, along with private healthcare facilities for foreign residents.

He says if Northern Cyprus didn't have the international restrictions on it that it still has; it would look very different to now, and will look very different soon.

"If they just ease the restrictions a bit, it will make things much, much easier for us," he explains.

Foreign homebuyers should watch out though, as the Greeks, who had to move off their land when the Turkish military arrived in Cyprus in 1974, are still not happy about it, and take exception to houses being build on what they see as their territory. Sometimes, the British legal system agrees.

In 2006, a British couple won a case brought against them by a Greek man who said they had illegally built on his land in Northern Cyprus, but the then Prime Minister's wife, Cherie Booth, sent him packing with $1m of the pair's legal fees to pay.

However, in April this year, the tables turned and an appeal by the couple to the Supreme Court -- to overturn a Court of Appeal judgment to demolish their house and return the land to the Greek owner -- was dismissed. The retired couple must also pay the rightful owner compensation by drawing on funds tied up in their properties back in the UK.

David Richardson, Managing Director of Property Sun Turkey Limited says that his company took the step a few months ago not just to sell properties on mainland Turkey but to include North Cyprus properties too, thanks to ongoing inquiries by Brits.

He believes that although there is much press in respect of property buying in North Cyprus, the reality and facts are that if professional guidance is sought and due diligence taken, then the opportunity to purchase a wonderful home on this beautiful unspoiled part of the island is no different to buying anywhere else in the world.

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