ULI Turkey: Emerging Trends in Real Estate® Europe 2017

On 30 November, ULI Turkey held an event in Istanbul to discuss the findings of Emerging Trends in Real Estate® Europe 2017, an annual forecast of real estate investment and development prospects undertaken by ULI and PwC.

According to the report, developments in Europe have resulted in a change in the preferences of investors. Istanbul has been assessed as a high potential market in spite of the fact that in the short term it has gone down in the rankings as an investment destination. Brexit has changed the balance in Europe and created new opportunities for a large number of markets, and German cities have become safe havens for investors and developers.

Just as Brexit affected London, the coup attempt in Turkey had a similar negative effect on Istanbul. Since the research was conducted directly after the coup attempt, Istanbul was not seen as a top destination for international institutional investors in the short run. But there is the possibility that investment from Middle East expecting high returns may still favour İstanbul. The factors that may effect İstanbul positively are a strong banking industry, the possibility that the government may extend the support given to the industry after the coup attempt, existence of a liquid internal demand that may hinder the growth of the problem, and a young population and fast growing middle class fuelling internal consumption.

In his keynote speech, Özgür Altuğ, BGC Partners Chief Economist, assessed the positives and negatives of the global economy in 2017, and its effects on the Turkish economy.

PwC’s head of real estate in Turkey, Ersun Bayraktaroğlu, examined the report in the context of the Turkish real estate industry.  According to Bayraktaroğlu, the fact that the report was prepared right after Brexit and the coup attempt in Turkey caused both London and İstanbul to fall in the rankings “The assessments in the report indicate that 2017 will not be a prosperous year in Europe, said Bayraktaroğlu. “Political uncertainties influence economic conditions, and these in turn affect investors decisions directly. As I have always stressed, developing countries like Turkey can only attract long term, sustainable, real investments during the periods.

“The four German cities in the top five show us that investors seek safe havens. Turkey, having a high potential with its demographic, geographical, and economic indicators, should try to create confidence in investors with carefully planned and well analysed policies during such unfavourable periods.”

Ayşe Hasol Erktin, Chair of ULI Turkey, discussed the impact of uncertainty on investment and development prospects in Europe. “This year’s report points out to the uncertainty in the global real estate markets,” said Erktin.  “For the first time, 89% of the interviewees point to political uncertainties as their greatest concern.  Stemming from populism, this uncertainty is expected to last in the mid-term. One of the results of this is that the German cities have started to be viewed as safe havens.

“International investors, when choosing the cities they will invest in, consider physical and social infrastructure, life quality, diversity in population, farsightedness of the local governments, and sustainability. Migration and terrorism are key factors of concern.

“On the other hand, advances in technology and changes in the lifestyles of the new generations convert real estate from being a product to being a service, and dictates that it should be subject to innovative approaches. Alternative investments such as student housing and shared/serviced offices, beyond the traditional approach put forward innovation and management. Traditional types of investment are viewed more risky compared to alternative investments. Overall, investors think that in 2017 returns will decrease.”

The conference ended with a panel where both the shape of the global and Turkish real estate industries were discussed alongside the findings of the report. The panellists pointed out that in times of economic difficulty, the real estate sector will be more inclined to re-organise itself. All panellists expressed that the Turkish real estate sector needed to be more transparent and an independent regulatory authority was suggested for monitoring the real estate actors and actions. The need for reliable statistical data was also mentioned.