A close colleague with over 9 years in the Turkish VC/PE industry recently told me that real estate, of all potential Turkish investments, will have the greatest investment potential going forward in the next 10 years. Indeed, perhaps Turks have always known this, when markets were between crises, or politicians were finished with their rhetorical recants, the people have always held their greatest assets either under their mattresses or in the land that they own (and not in the banks).
Yes, we have seen this, but with the recent passing of mortgage laws and banks scrambling for a piece of the action, not to mention the need for 150,000 new homes every year because of the increase in population, Turkey is coping with a construction boom, and finally consumers may have the ability to get cheap credit. As well, according to a report on Turkey by the US Commercial Service, "projections made for 2005 to 2015 state that, on an annual basis, 900,000 houses should be built to meet demand." Naturally with a boom in the construction sector, you must also look at the building materials, cement and architecture sectors. As of 2006, all of these subsectors in construction accounted for roughly 30% of GDP! Building products alone made up a 20% share of total Turkish exports. To further drive his point home, my friend forwarded this fantastic 6-page Turkey factbook by Europe Real Estate (europe-re.com).
What people fail to understand or consider is the girth of Turkey's greatest asset: its land. While we look at it as Turkey making good use of its resources, others might look at it as exploitation. But let's face it - Turkey is an emerging market territory reaching "emerged" status; it is the bread basket and manufacturing localle of Europe, and its simply expanding. Naturally, as more and more businesses and people discover its potential, land values will continue to inflate. In addition, by simply searching for success stories pertaining to accession countries to the EU (like Spain, Ireland, the eastern European countries), large gains were reaped in those years after accession occured - the same can be true for Turkey.
This means we will continue to see growth in construction materials, construction and architecture (which, in addition, is promising for GDP). Those firms that smartly have a man on the ground to monitor the truly lucrative opportunities in these construction sector firms, as well as projects, will be the differentiating factor for foreign investors. Established PE firms in Turkey are already salivating and chomping on the bit - ready to go.
Following the advice given to me by my friend, Grandstanding Traction will attempt to keep a closer eye on this market and on the future by dividing posts into various sectors for easier access and closer analysis.
Technorati Tags: architecture, Building Materials, construction, Emerging Markets, EU Accession, Turkey, Real Estate
Labels: Architecture, Building Materials, Construction, Emerging Markets, EU Accession, Real Estate