What is the impact of the fall of Turkish Lira on the Turkish real estate market?
The collapse of the lira against the dollar puts Turkey in a difficult economic situation. The Turkish lira lost about 30% of its value compared to the dollar. In addition, the trade in the financial market has been dropped to 40% against the dollar.
Since the crisis are primarily political, due to some disputes between the United States and Turkey after the imposition of high taxes on Turkish imports.
Yet, the real reason for the crisis as we found, is the Turkish external debts and the large loans taken by companies in foreign currency during the real estate revolution. As the crisis intensified, investors became concerned about the possible negative effect on their investments, especially in the real estate market.
Investor’s concern of the crisis impact on the real estate market:
It was sensible for real estate investors to worry for their property, especially since most of the loans were in dollars and these debts and loans are paid back in dollars as well while the Turkish Lira is falling. And the dilemma start from here as their project may be kept on hold.
However, these concerns are not real because of the fact that the real estate market in Turkey is one of the most powerful markets in the world that does not easily collapse from such economic crises; furthermore, the recovery is much faster than the other countries as this sector contributes strongly in the Turkish economy.
The Turkish sector is one of the most important economic sectors in the country it contributes by 8.5% of the gross domestic product. The number of transactions witnessed by the real estate market last year amounted 1.4 million, with an average of 115,000 transactions per month.
The real estate acquired last year by foreigners amounted $ 5 billion was mainly by Iraqis at the first rank then Saudis comes second, after that Kuwaitis. All these figures and statistics were made while Turkey is in the middle of the political battles internally and externally in addition to the economic challenge. Given that, the real estate market has maintained its progress and stability.
What did the Turkish government do to support the Lira:
Although the crisis has begun after the Turkish lira fall against the US dollar exceeding 7 lira/dollar, yet the Turkish President Recep Tayyip Erdoğan did not show any distress or concern defying the political situation and stressed that Turkey is fighting an economic war and will prevail.
"The fall of the lira does not reflect the economic realities of the country"
This was the reaction of Recep Tayyip Erdoğan, he disapproved the raise of interest rates that sounds like a typical solution in such crisis. However, he took the challenge and adopted the reduction of interest rates to encourage loans and stimulate economic growth.
In order to support the financial stability of the markets, the Central Bank of Turkey took a series of quick measures and pledged to the banks to provide all kinds of liquidity needed. The Turkish Central Bank is expected to do so by raising the financial revenues, which encourages investors to buy in lira in which it will strength the currency and reduce the cost of imports.
Steps taken to help with bank by injecting liquidity has paid off and the Turkish lira has recovered by 3% against the dollar as it traded around 5.75 lira against the dollar. Turkish Finance Minister Berat Albayrakis scheduled a conference to reassure investors about the economy.
What is the impact of the lira fall on the real estate market in Turkey?
The media’s exaggeration of the lira fall as if it is the beginning of the economic collapse is false, especially that the currency's decline has a positive side where it increases the number of visitors and investors to Turkey. This is from by locals, foreign experts and investors with adequate experience in the Turkish property market point of view. "A devaluation means a great opportunity to acquire more real estate" said by Majid Abdel-Azim, an Egyptian real estate expert. Moreover, as for the investors who are in the market and already acquire a property, Majid Abdul Azim says: "Whoever bought a property has two options, either to exit the market now and this is not a preferable option or wait and stand firm until it improve"
It is clearly the right decision to hold out against the crisis impact on the economy especially that real estate prices will drop to encourage buying in Turkish lira. In addition to the tourism seasons and the rapid recovery expected. All these factors shows that it is not wise to exit the real estate market in such time and situation.
"I urge investors not to give up their investments, at least not to make any capital losses, especially as the Turkish lira will return to its strength sooner or later."
Said by Aziz Bakan - Real estate expert.
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