The announcement that the sale of residences has begun at a landmark US$2.5bn mixed-used development project, under construction in the centre of Istanbul, highlights the momentum now building in Turkey's residential construction market. BMI notes that following the economic downturn, the alignment of key factors such as robust economic performance, rising housing loans and a stable banking sector with strong population pressure and tourism growth is fuelling expectations of a housing boom.
The Zorlu Centre mega project is a 102,000m2 mixed use development and the first of its kind in the country. Indeed, the existence of such a flagship project will add to Istanbul's attractiveness to international developers -- particularly those in the Middle East and UAE, where such multi-purpose developments have proliferated in recent years, but where real estate opportunities remain muted.
The demand levels for residences from the project will be a useful bellwether for gauging market sentiment, with foreign investors likely to be watching closely. BMI expects strong demand given both the strategic location and high profile nature of the project. The residential development will consist of 584 luxury residences, ranging from 117m2 to 733m2, with prices starting from US$9,500 per m2. The project will also include a shopping centre with nearly 200 stores as well as a 50,000m2 culture and arts centre, 22,000m2 of office space and a five-star hotel.
Having experienced a deep contraction of nearly 25% year-on-year (y-o-y) in real terms over 2009, we anticipate a strong rebound of 4.5% real growth in Turkey's residential and non-residential construction industry value in 2010. Indeed, we are increasingly upbeat about the prospects for the residential construction sector as the necessary foundations for a strong and sustainable housing market appear to be falling into place.
Underpinned by a strong macroeconomic outlook and a stable, well capitalised banking sector, consumer loans and, notably, housing loan volumes are on the rise, opening up the housing sector to the rising and increasingly affluent population. Indeed, a strengthening middle class should allow banks to be more aggressive in their lending practices as they compete for greater market share, which will further open up the market to those previously unable to access the mortgage market.
Improvements in lending will therefore reduce financial risks for developers who may have previously been deterred by such weaknesses. Indeed, with a depressed European housing market and a Middle East real estate market still in varying stages of recovery, Turkey is a BMI top pick for the region. Our bullish forecasts reflect this attractive outlook, predicting 5.7% y-o-y between 2010 and 2014.
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