Abstract
The economic environment in Turkey remains depressed. Turkish capacity
utilisation fell to 64.7% in
December, collapsing 11.3 percentage points
from the previous month. This was the lowest nominal
capacity utilisation
level and the largest month-on-month drop yet recorded in the 18-year
series.
Economic efficiency in Turkey as measured by capacity utilisation
is being doubly impacted by an
unprecedented deceleration in output
combined with a still high level of output potential, which does not
bode
well for economic growth. We now consider the risks that we highlighted
previously of a more
protracted recession lasting into H2 as part of our
core scenario. As such, we forecast full-year real GDP
growth to come in
at -5.7% in 2009. Beyond 2009, we maintain our view for a recovery to
positive
growth in 2010, with the economy forecast to expand by a real
1.7% that year.
Negotiations continue on a large loan from the IMF. The
original US$10bn deal expired in May 2008.
IMF deputy director, John
Lipsky, met with deputy prime minister, Ali Babacan, on June 19, and said
afterwards that ‘our contacts will continue in the coming weeks’.
AFP reports that the business
community strongly supports the loan, which
it hopes will build investor confidence, but Prime Minister
Recep Tayyip
Erdogan has insisted that the loan is not imperative for the Turkish economy.
Lipsky, on
the other hand, clearly sees the loan as necessary for
Turkey’s economic wellbeing, saying that ‘the rising
fiscal
deficit and weakening loan quality could, if not addressed forcefully, cloud
the growth outlook,
including by curtailing banks’ ability to extend
credit’.
The Istanbul office market saw reduced activity in Q408,
according to DTZ Pamir & Soyuer. ‘In
response to deteriorating
financial conditions, international companies started to revise their
space
requirements to minimise costs and downsize their business
activities,’ the firm said. DTZ reported prime
rents in Q109 of
US$33 per m2 per month (m2/month) in the European side of the country and
US$20m2/month in the Asian side, both down slightly from the previous quarter.
Figures available to
BMI indicate that the year-on-year increase in prime
office rents of 10.4% in Q408 became a fall of 11%
year on year in Q109.
Vacancy rates are also continuing to fall, according to DTZ, and now stand at
4.5%
on the Europe side, and 9.5% on the Asia side. There is also a
limited supply of new office space, with
about 50,000m2 a month delivered
in Istanbul region during 2008. By the end of 2012, DTZ estimates
about
180,000m2 of additional office space will be added.
Because of limited
site availability in the established industrial areas beside Istanbul’s
major highways,
we are seeing increased industrial development in newer
locations outside of central Istanbul.
Bearing in mind the factors that
contribute to Turkey’s Real Estate/Construction Business Environment
Rating (RECBER), we suggest that the following are the key issues to monitor
for the real estate sector in
the coming year or so:
- Bank lending is
the main factor affecting the RECBER for Turkey. Turkey has been hit by
capital shortages and is expected to suffer a deep contraction in 2009.
-
The construction sector is moderately large, and its prospects are supported
by the urbanisation
of the country. Any significant increase in
construction spending would be a good sign.
- The RECBER is held back by
fairly poor scores for the bureaucratic environment and the legal
framework, together with the financial infrastructure. Any improvements in
these areas could
have a significant and positive impact on the prospects
of the real estate sector.
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