Turkey Leads The Global Rise In House Prices For 2016
Demand for housing in Turkey, New Zealand, and Iceland has never been stronger. Analysts are wondering how long it will last.
This news is enough to make you splutter out your morning coffee. Turkey, New Zealand and Iceland are the three countries leading the surge in global house prices this year. It’s like India, Faroe Islands and Maldives leading the medals tables at the Olympic Games.
In a year when the bizarre has become the norm, housing giants like the UK and U.S. have been relegated to the also-rans. Turkey, on the other hand, has steamed ahead with a staggering 13.9% year-over-year growth from July to September, according to a Global House Price Index released by real estate company Knight Frank.
But why Turkey of all places? According to Al Monitor, much of Turkey’s growth is due to an unlikely source—refugees. “About 3 million Syrian refugees who have entered Turkey are the leading factor of the boom in housing demand and rent. The demand created by Syrian refugees in cities naturally increases rent, therefore, it increases the price of residences,” says the site.
“Rents skyrocketed in cities like Istanbul because of the Syrian refugees,” says Burak Kanli, an economist at Finansinvest. “But you should not ignore that there is much interest from countries like Iraq and Iran where people think they may have a better life in Turkey.”
Will it last? Possibly. Although there has been much talk of a housing bubble in Turkey, it has a large young population, a strong European tourism industry and some stunning scenery. Let’s not forget its role as the gateway to Europe from the Middle East. However, terrorist incidents have seriously damaged its appeal. The threat of rising interest rates will also be a factor.
If Turkey is the gateway to Europe, then New Zealand is at the nexus of the West and Asia. An English-speaking country that’s geographically closer to Asia than Europe, it has buoyant manufacturing, financial services, health and hospitality. The advent of the Brexit vote in the UK has seen a massive interest in immigration. The Trump presidency may have a similar effect from the US.
For a small country with a harsh climate, Iceland seems to believe in the saying, “Go big or go home.” The country imploded spectacularly amid the global housing crisis of 2008, when it was highly over-leveraged. But the same reasons that caused the market to become overheated before 2008 are still in place and have, in part, been responsible for its rapid resurgence.
“With increased tourism there are now more foreign buyers every year,” Ingólfur Gissurarson at Valhöll estate agency told the Financial Times last year. “There are plenty of high-end, centrally-located developments coming on the market.”
“Most of the foreign buyers tend to be from the US,” says Grétar Jónasson, director of Iceland’s Association of Real Estate Agents. “But Icelanders living abroad are now buying second homes in Iceland.”
Globalization and the internet have also been contributing factors in property growth away from traditional, high priced cities. Unless there is a a reason to live in a city like London or New York, residing somewhere cheaper or with a high quality of life because of its geographic location is a big draw.
“Reykjavík is cosmopolitan and cool and I love it,” David Oldfield, a photographer who moved to Iceland in 2007 after 25 years in London told the Financial Times. “It is easy to live here, Reykjavík is great for socializing, there is no commute to speak of.”
And that speaks volumes.
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