Real Estate & Construction

Open House

Real Estate

The real estate sector is riding on the back of increased mortgage penetration rates; however, it will have to manage its assets wisely if it wants the good times to continue.

Turkey has experienced a real estate boom over the past five years, which is clearly visible when looking at the skylines of major cities such as Istanbul and Ankara. Following this revival, investors hope that a bust can be avoided and a massive oversupply of commercial and residential space is not created if demand drops away as new projects near completion.


When it comes to landmark projects, the overwhelming majority of them are located in Istanbul. Something the city is trying to do is establish an international brand for itself, similar to that of Paris, New York, or London. When thinking of these cities an image comes to mind, be it romance, royalty, or a motto such as “The Big Apple.” “Nothing particular comes to mind; of course Istanbul has many attractions, but none are prioritized,” Hakan Gümüş, General Manager of EA Inşaat, told TBY. The trick for the city now is to link an aspect or idea to it so when people think of Istanbul an image is immediately brought to mind. By doing this, the city will be able to attract major international projects not just on market conditions at the time, but also with its reputation, like New York or London can. Istanbul is starting to reap the benefits of trying to establish such an image with the recent opening of Trump Towers in the Åžişli neighborhood of the city. The towers are a mix of residential, commercial, and retail offering 204 luxurious apartments. The project cost $400 million and was led by Doğan Holding. The Trump Towers in Istanbul is the first such project in Europe for Trump International. “Istanbul is a world city and is among the top cities for foreign investors in the arena of international real estate,” Bülent Kural, General Manager of Trump Towers International, explained to TBY.


TurkStat estimates that there were 19.2 million residential buildings in Turkey as of end-2012. Approximately 40% of these are classed as “irregular,” and 67% lack settlement permits according to the Housing Development Administration of Turkey (TOKİ). Demand for all classes of housing far exceeds supply at the moment. TOKİ is a semi-governmental agency that is looking to satisfy the demand for mass housing. Under Turkish law, anyone that does not own their own home is able to apply to TOKİ to purchase one from its developments. TOKİ currently meets between 5% and 10% of all of Turkey’s housing needs and is aimed at helping low- to middle-income people get on the real estate sector. Due to the current high demand, houses are sold to applicants through a supervised lottery. As the buyer does not receive a title deed until the final payment has been made, the level of loan defaults is low, while only one in every 2,000 houses is the subject of repossession. One of TOKİ’s main objectives is to eliminate irregular and poor-quality housing, and improve the general earthquake compliance of the existing housing stock. The authority has earmarked 6.5 million houses across the country for renewal and replacement over the next 20 years to reduce the risks posed by natural disasters. Since Istanbul is at risk of major earthquakes, much work has been carried out in poorer neighborhoods across the city.

The construction sector is looking to develop 7.56 million houses over the next decade, with TOKİ setting the target of building 1 million residential units by 2023. Currently, TOKİ has built 120,000 houses in Istanbul, 70,000 in Ankara, and over 10,000 in other major cities around the country. Over the past decade, TOKİ has spent TL57 billion on housing projects. In 2012, the government issued 753,251 building permits for dwellings, which was a 15.5% rise on 2011 at 652,366. In 1Q2013, 158,466 residential permits were issued, representing a 9.3% increase on the same period the year before at 144,972. When it comes to mortgages, a total of 270,136 were issued over 2012, with the majority being in Istanbul, at 79,626, closely followed by Ankara with 42,216. In 1Q2013, the issuance of mortgages is already looking healthy, with a total of 115,508 granted across the country—27,391 in Istanbul and 16,764 in Ankara. Registered house sales are also on the rise. In 2012, there were a total of 701,621 sales across the country, with 167,110 in Istanbul and 106,019 in Ankara. Over 1Q2013, 273,826 sales were made nationwide, with 58,682 in Istanbul and 34,786 in Ankara, demonstrating that the Turkish housing market has made a promising start to the year. Also, since the government enacted a bill easing many of the former restrictions on non-Turkish nationals buying property in the country in 2012, foreign real estate acquisitions have responded. A total of 13,495 properties were bought by foreign nationals across Turkey since the bill came into effect. Over 83 different nationalities have bought houses in Turkey, with Russians being the most active at 2,313 properties. Mersin province is the most population location for foreigner buyers, followed by Izmir, Yalova, Bursa, Ankara, and then Trabzon. It is likely this trend will continue into the future.


The commercial real estate market has largely remained stable of late. The vast majority of international companies head to Istanbul, where most of the A-Grade commercial space is located. The sector is then split again in the city between the more expensive European side and the up-and-coming Asian side. The most popular areas for commercial real estate are close to the airport on the European side, where 18% of the city’s A-Class offices are located, Ümraniye with 17%, and Levent with 16%. These three areas represent 65% of the city’s total office space of all classes. The city is also experiencing a shift across the Bosphorus. In 4Q2012, the average vacancy rate of A-Grade office space on the European side of Istanbul was 8.92%, which then increased to 13.33% across the first half of 2013. Likewise, on the Asian side in 4Q2012, the average vacancy rate of A-Grade office space was 18.48%, which then dropped slightly to 17% across 1H2013. When it comes down to specific neighborhoods the numbers are more telling. In Åžişli on the European side, the vacancy rate increased from 27.46% in 4Q2012 to 53.06% in 1H2013, while Kavacık, on the Asian side, dropped from 25.63% in 4Q2012 to 7.75% in 1H2013. One of the main reasons for this change is rental prices. The average asking price for A-Grade office space on the European side increased from $28.67/sqm/month in 4Q2012 to $30.12/sqm/month in 1H2013, while on the Asian side the average price dropped slightly from $20.85/sqm/month in 4Q2012 to $20.23/sqm/month in 1H2013. When looking at specific neighborhoods the prices can vary quite wildly from a low of around $11/sqm/month near Atatürk International Airport to $47/sqm/month in Taksim. In Levent, the price is $36.91/sqm/month, while on the Asian side in Kavacık it is almost half the price at $19.03/sqm/month. Even though prices are higher and vacancies are increasing on the European side, there is still over 1 million sqm of new office space currently under construction or in the planning stage. This is expected to be available for rent or purchase within the next three years. The vast majority of these offices will be built in the business districts of Levent, Maslak, and Gayrettepe on the European side. On the Asian side, a little under 500,000 sqm of new office space is being planned in the same period, with Ataşehir being the main magnet. The Turkish real estate market is showing signs of growth. For the residential segment, much will depend on the availability of mortgage financing, with foreign real estate sales providing support in popular tourist locations. On the commercial side, the market will depend upon GDP growth and a steady inflow of FDI into the sector. Maintaining market confidence will be a key challenge for the government going forward.

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