Istanbul real estate market: the cheapest in Asia

A graph showing Turkey’s historical and projected debt-to-GDP ratio between 2015 and 2025 according to the IMF. And given the new developments in the 2020s, the country’s economic situation will deteriorate even faster.

The situation gets even worse once you realize that most of this debt is denominated in US dollars rather than Turkish liras.

Thus, the amount owed by borrowers has effectively tripled over the past five years. Turkish debtor companies must repay their loans in dollars. Meanwhile, the lira is depreciating rapidly.

Second, public spending is wasted on expensive infrastructure projects. Many of them are poorly designed while few will ever become a net gain for the Turkish economy.

Istanbul Canalis just one example. This is a planned 50 km canal that will run along the Bosphorus and is expected to cost over $10 billion.

The new channel has two big problems though. For starters, the Black Sea is far from having enough trade to justify its enormous cost. Second, international law makes it clear that transit through the Bosphorus is free, which makes a canal superfluous.

Finally, but perhaps most importantly, Turkey has financial management issues that will not be resolved any time soon.

President Erdogan has essentially established himself as the lifetime ruler of Turkey, after the 2016 elections. He is now the ‘final say’ when it comes to many important decisions in the country, including economic ones .

However loved by his conservative base, Erdogan’s forte is arguably not the economy. He supports the controversial view that higher interest rates lead to inflation and remained adamant that rates should be lowered.

Erdogan is quick to fire any high-ranking economic official who dares to raise interest rates, even though it’s probably the right move. Turkey has had three different finance ministers for less than five years, in fact.

The result is that international investors lose confidence in Turkey, and the lira continues its steady decline.

Why You Still Shouldn’t Buy Property In Istanbul

US tariffs may have triggered the lira crisis in the first. Unfortunately, Turkey’s problems are huge and go far beyond recent politics.

Quite frankly, Turkey is an economic basket case. Major structural problems are unresolved and will likely get worse before they get better.

Istanbul’s real estate market was also suffering from oversupply long before the lira crisis. Large-scale urban housing projects were already creating excess supply many years ago.

Moreover, the Turkish Lira has always maintained its worrying downward trend. Have you made the mistake of holding liras in the last 10 years? If applicable, you lost about 80% of your purchasing power.

Reading it has never shown itself capable of being appreciated over the long term. I don’t believe that will change in the near future.

In summary: you should not fall into the Turkish lira value trap. Real estate in Istanbul may seem cheap, but the country’s economic crisis has only just begun.

You shouldn’t bet on a return to reading it anytime soon. Instead, consider buying real estate in places like Malaysia or the Philippines if you’re looking to own foreign property with the potential for currency appreciation.