Euro-free Istanbul resists the recession

A robust economy and youthful population are driving a booming property market in this exciting city
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Buy-to-let properties in many markets overseas have been hit hard by the recession. Plenty of investors got their fingers burned buying in emerging countries that, in property ownership terms, never quite emerged. But it's a different story in Turkey.

A second home in Istanbul might not be the first thought for an investment property, but the rental yields in this exciting city could make you think again — no wonder an increasing number of investors are arriving from across Europe and the Middle East.

Istanbul is booming, a popular business and tourism hub complete with historic mosques and minarets and a buzzing restaurant and bar scene. Hip hotels provide heady views over the densely built city that unites Asia and Europe, and where water — the Bosphorus, Golden Horn and Sea of Marmara — is never far away.

© Alamy
The Grand Bazaar is among the main attractions for people visiting this historic Turkish city

Economic outlook
A recent report by accountants PwC ranked Istanbul as Europe's best property investment destination, helped by a robust economy and youthful population, while the Organisation for Economic Co-operation and Development predicts Turkey's economy will be the fastest-growing among its members for 2011 to 2017.

Inflation is falling, GDP last year was 8.9 per cent and the Turkish Central Bank expects a shortfall of 2.75 million homes by 2015 in Istanbul alone. Knight Frank figures show Turkey was one of only six countries worldwide (including Brazil and Russia) reporting double-digit house price growth last year.

Altan Halil, from Islington, paid £80,000 for a one-bedroom apartment in Taksim, steps from the illustrious Pera Palace Hotel. After renovating it into a light, airy space of 620sq ft it is valued at £110,000. Halil plans to let it for £60-a-night for short stays, capitalising on the central location close to a Metro station and major tourist sites.

"There are not many European cities where you can buy at a reasonable price and get a good return," says Halil. "Istanbul is an exciting and energetic city, on the up with plenty to see and do. The buying process was straightforward and you don't even need a solicitor, although I would recommend using one."

£489,000: a large two-bedroom period apartment overlooking the Bosphorus in Istanbul's upmarket Galata. Through Place Overseas (020 8371 0059)
City-centre property
Taksim, north of Sultanahmet, has benefited from recent inner-city regeneration, with renovation and new-build projects on offer.

Place Overseas has modern open-plan 645sq ft studios from £180,000 that rent for £2,000 a month with annual maintenance at about £360.

Nearby, a two-bedroom apartment in a classic 120-year-old building by the Bosphorus — that until recently was rented for £3,245 a month by the Italian embassy — costs £489,000.

"There's a shortage of apartments in central Istanbul for families looking for long-term rental, especially at midmarket prices," says Esra Dundar, of Place Overseas. "Two to four bedrooms rent strongly. The city attracts business people and tourists, and hosts major sports and cultural events annually."

Prime hotspots
Prime areas of Istanbul include the banks of the Bosphorus — where "yalis", 19th-century mansions, sell for several million pounds — and Levent, the central business district. Close by, Kuruçesme is the Knightsbridge of Istanbul, complete with high-end boutiques and on-trend ladies lunching. A new two-bedroom ground-floor apartment in a 15-unit block there, close to the new W Hotel, costs £271,000 through Place Overseas. Maintenance is priced at £60 per month.

£271,000: a new two-bedroom apartment in Taksim. Through Place Overseas (020 8371 0059)
The city outskirts
Satellite towns an easy commute from Istanbul have sprung up over the past decade and investors are eyeing up rental yields. The best apartment complexes offer a convenient suburban lifestyle with shops, schools, parks and hospitals on the doorstep and bus and train commuter links to Istanbul.

"There is a growing body of workers moving to Istanbul's suburbs who require housing," says Louise Reynolds, of Property Venture. "In the centre, yields tend to average three to four per cent, but the more affordable outskirts offer investors the chance for yields of seven to 10 per cent."

West of the centre, Property Venture has new-build apartments from £48,660 for one bedroom at Esenyurt, while Place Overseas is selling Modern Vadi, where recently released Phase Two has 1,500 off-plan apartments in 11 blocks priced from £42,000 for 710 square feet.

The modern glass-and-steel complex has a pool, parking, cinema and shops. Seven hundred flats in Phase One are built and sold, while 65 per cent of Phase Two has sold, with completion planned for May next year. Ninety per cent of buyers to date are Turkish.

* Place Overseas: (020 8371 0059).
* Property Venture: (01932 849536).
* Buying costs: allow five to six per cent for buying costs in Turkey, including four per cent stamp duty.
* All home purchases must be approved by Turkey's Army Office (TAPU), generally a simple formality.

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