Property investors wary of Turkey before riots

Tue Jun 4, 2013 12:39pm EDT
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By Tom Bill

LONDON, June 4 (Reuters) - A protest against plans to fell trees for a development near Istanbul's Taksim Square, the precursor to five days of rioting, reflects the scarcity of open space in Turkey's largest city, thanks to rampant construction.

Broader anti-government sentiment has fuelled the violent protest after a police crackdown on the peaceful demonstration, which won't help Turkey's appeal to global property investors already wary of its chaotic planning system and unappealing leasing market.

Although Turkey received its second investment-grade credit rating last month and construction is booming, international capital from real estate investors has been thin on the ground, though transaction data is limited in what is still a relatively opaque property market.

"There have been riots in other countries, but Turkey is different because it comes on top of other issues," said an investor at a fund with more than 5 billion euros ($6.5 billion) of European property under management.

The decision to bulldoze a handful of trees in Gezi Park is part of plans to pedestrianise the adjacent Taksim Square and build yet another shopping centre and luxury flats.

Parts of Turkey are already "overbuilt", said Murat Ergin, managing director of Istanbul real estate agent Kuzeybati.

Istanbul has 2 million square metres of mall space under construction, dwarfing the 1.3 million total mustered by 60 Western European cities tracked by consultants CBRE. Only Chinese cities Chengdu and Tianjin have more.

Lax controls have created a beggar-my-neighbour building spree as bigger new malls muscle out older rivals.   Continued...