What is return On Investment Value (ROI) in real estate in Turkey
We talked in our previous article, about the types of real estate investment in general, and the forms of real estate investment in Turkey in particular, and we mentioned that real estate investment has different patterns depending on the period within which the investment return is expected, and we also mentioned that the investment aspects vary based on the form of this return, either by resale or rent of the property.
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However, in the previous article, we did not mention the value of the investment return and the amount of expected profits that the investor will earn, so in this article we will clarify the average investment return for each type of investment that we explained previously.
Before going into details, it is necessary to refer to several important points that we considered during our research and the results that we have reached:
♦ For the figures in this article, we relied on several official and unofficial sources concerned with the Turkish real estate market and monitoring the rates of increase in prices according to the difference in supply and demand, and the difference in the annual inflation rate.
♦ We used the Turkish lira to calculate the return on investment on an annual basis.
♦ We chose Istanbul as it is the most popular city for investors, and therefore the percentages mentioned in this article may not apply to the investment returns of real estate outside Istanbul.
♦ We will mention the average rate of return on investment, which certainly may vary from one region to another.
♦ In addition to the above, we relied on our experience in the real estate field and our daily monitoring of the movement of the real estate market in Turkey and the change in real estate prices and rents.
1 - Return on investment by leasing the property:
Real estate rental is one of the most common forms of investment in Turkey, and it is very popular among Turkish citizens themselves, as we find that many Turkish citizens prefer buying and renting a property over any other type of investment, due to the high demand for rental throughout the year.
Depending on the details we mentioned in our previous article, the annual rental returns for real estate in Turkey are as follows:
♦ Residential apartments: annual rental return of 4% as a minimum of the property value.
♦ Furnished apartments: annual rental return of 6% as a minimum of the property value.
♦ Commercial shops: The annual rental return is 5% as a minimum of the property value.
♦ Hotel apartments: annual rental return of 8% as a minimum of the property value.
Note: Regarding hotel apartments and furnished apartments, it is worth noting that they may be vacant during certain periods of the year, but they are rented on a daily or weekly basis in good prices during the tourist seasons, and we have taken this into account in the mentioned percentage.
2 - Return on investment through resale:
Real estate prices in Turkey are having a steady annual increase. According to the Turkish Statistical Institute, the average increase in housing prices during the past year was 30%. This was certainly not a natural increase, as it was accompanied by the global spread of the Corona epidemic, which prompted a large percentage of the population to turn to fixed assets, in addition to the difference in the price of the Turkish lira, as is known.
However, in general, real estate prices in Istanbul have an annual increase that varies according to the type of property and its region, and accordingly we can determine the return on investment for resale as follows:
♦ Ready real estate (residential and commercial apartments): 10% annual increase in the value of the property as a minimum.
♦ Real estate under construction: 25-30% increase upon delivery of the value of the price paid in instalments.
♦ Lands prepared for construction: The construction project is a high-return investment, as the land, after construction is finished, will be divided into residential apartments and shops, the value of the investment return may double several times by the end of the project. However, several things must be considered, namely that this type of project needs to obtain many licenses, in addition to the significant increase in the prices of building materials, as the increase during the first eight months of this year reached 45%, according to the Turkish Statistical Institute.
♦ Purchase of agricultural land and resale when it enters the regulatory area: It is not possible to determine a fixed percentage of the expected return on investment for such a project, due to the different regions and their proximity or distance from government projects and public utilities such as airports, industrial cities, and tourist areas. But we mention as an example of this type of investment the lands located on both sides of the Istanbul Canal project, where a decade ago these lands were almost empty lands and sold at cheap prices, while at the present time, after the announcement of the canal project, it has become one of the most expensive areas. It made the owners many times the purchase price.
In conclusion, we would like to note that the percentages mentioned in this article are correct until the date of its publication, and they may change according to the movement of supply and demand. For any additional information on the return on investment in real estate in Turkey, you are welcome to contact us to take the advice from real estate experts.