This article will tackle why Izmir may be an interesting investment destination for those who wish to invest in Turkish real estate. I spent a lot of time in Izmir, and invested in real estate there myself.
We’ll discuss the following points in this article:
- Why make a real estate investment in Izmir
- The case against making a real estate investment in Izmir
- The real estate market in Izmir
- Which neighborhoods are investable in Izmir
- A concrete example of a real estate investment in Izmir
- Conclusion – who is such an investment for?
- How to go about investing in Izmir real estate
1. Why make a real estate investment in Izmir
Izmir is very large city with a diversified economy
Izmir is a city of 3 million people, with its population growing about 1% per year.
It is also Turkey’s third largest economy after Istanbul and Ankara.
Just as Istanbul is diversified, so is Izmir. But unlike Antalya and Bodrum, it is not heavily dependent on tourism. Izmir’s regional economy is comprised of 30% industry, 23% trade and related services, 13% transportation and communication, and almost 8% agriculture.
Izmir is located in a region with much to offer
The city proper of Izmir does not see much international tourism, as tourists prefer neighbouring Cesme and the many picturesque towns along the Agean coast. Nearby, the ancient city of Ephesus can be visited, as well as a shrine where the Virgin Mary is believed to have spent her last years.
It is an absolutely gorgeous part of the world. Izmir has been a known organized settlement for 3,000 years (!!). Humans have fought, and killed each other for thousands of years to have this land. This entire region is truly precious and rich in history.
Most tourism to Izmir, the city, is local. It is not a beach destination, as the engine of Izmir’s economy is its very large port. There aren’t any beaches in Izmir, though there is a very pleasant promenade along the whole coast of the city. To go to the beach one must head out of the city into the neighboring villages and towns.
Local tourists are typically Turkish secularists, who love the city’s laid-back vibe and non-religious atmosphere. A large percentage of the population of Izmir used to live in Greece before population exchanges took place between the two countries. There are still some minorities from the old times, when Greeks, Armenians, and Jews were important minorities. Their numbers have dwindled, but the city is still sprinkled with beautiful, active Orthodox, Catholic, and even Anglican churches as well as many active Synagogues.
Izmir offers a very different target market from Antalya for real estate investors. You won’t be targeting mass tourism with a focus on Russians and Middle Easterners but rather:
- Local tourism
- Local business trips
- Off-the-beaten path digital nomads, lured by Izmir’s affordability and solid infrastructure, who want to live amongst locals
- Medical tourism
I’ve been spending a fair amount of time in Izmir, and I don’t speak a word of Turkish. People are not used to foreigners and don’t inherently try to rip you off, which is much more common in tourism hotspots. This being said, English not widely spoken at all.
Izmir offers much better value
By many measures, Istanbul is a more attractive market as it ticks all boxes (diversified economy, tourism from all over the world, local demand, and year-long tourism). However, Izmir offers very decent value for money. For example, $100,000 gets you a tier B property in Istanbul, but a tier A in Izmir.
Antalya is also always one geopolitical drama away from being empty for a few months, while Izmir, with more stability, would be unlikely to face such dynamics. Building is also a lot more constrained in Izmir, and the zoning laws more strict than in Antalya.
To be clear, Izmir is a play on value. With a limited budget you can get to own a nice apartment in a prime neighborhood of a dynamic city of 3 million people, with stunning views, an hour drive away from one of the world’s more beautiful regions.
Because there are few foreign buyers for now
Let’s be clear, the core value proposition of Izmir as an investment destination is that it is NOT Istanbul and NOT Antalya/Alanya/Bodrum where foreigners concentrate their real estate investments in Turkey.
There is nothing inherently wrong with these destinations. The core issue is that is has become harder to find great value real estate in the core areas of these cities due to strong local and international demand. The country’s Citizenship by Investment programme, though recently raised to $400,000, has been an absolute success amongst High Net Worth Individuals looking for a Plan B in an increasingly uncertain world. The market has also been positively impacted by Russian money flowing into Turkey, looking to diversify away from their economy, and with much of the Western world being mostly closed off to Russian investments.
The main foreign buyers of Turkish real estate have been predominantly Arabs, Iranians, Russians and Chinese. These are people who culturally like to go for “brand names”, hence the focus on these core areas.
The city of Izmir itself has not really seen much real estate investment by foreigners. When I was walking around going to local real estate agencies looking for property, the agents were very surprised to be dealing with a Westerner. Nobody would be surprised in Istanbul.
Also, something which was very telling was that in the last month before the Turkish Citizenship by Investment threshold was raised from $250,000 to $400,000, people were running around like headless chickens in the core areas of Istanbul and Antalya hoping to buy CBI-compliant real estate (Turkish seller, no tax issues), and a premium of almost 20% emerged between CBI-compliant properties and non CBI-compliant properties.
No such premium appeared in Izmir. Local sellers were barely aware that the CBI limit was being raised to $400,000.
Izmir is very well connected
Sure, the airports in Istanbul and Antalya have more diverse routes, but Izmir airport is brand new and is also well-connected. It has flights to all major cities in Europe, targeting both tourists and the Turkish diaspora, as well as to most major cities in the Middle East. https://adnanmenderesairport.com/en-EN/
There are also multiple flight per hour to Istanbul, a mere one hour away, for $30-$40 one-way.
I travel quite a bit between Istanbul and Izmir, a process that is an absolute non-issue.
2. Cons of making a real estate investment in Izmir
Lower rental yields on the long-term market
In central Istanbul it is not too complicated to find tenants who are willing to pay USD rents. Legally rents have to be set in Turlish liras, but you can sign a side agreement in USD. It is not enforceable in front of local courts, but many foreigners accept the principle.
This sort of set-up is not possible in Izmir as the market for long-term foreign tenants is much thinner. The local long-term rental market in Izmir is very liquid, thanks to strong demographics, but expect to receive gross yields of 3%-4% which is not particularly interesting. The play here is Airbnb.
The yields on Airbnb are actually rather decent. Here it’s important to understand the difference in target markets per city:
- Istanbul: Year long international tourism and business, mostly USD income.
- Antalya: Seasonal International tourism, mostly USD income.
- Izmir: Seasonal local tourism, year-long business, sporadic international tourism, medical tourism, and digital nomads – 50/50 TL/USD income. But more USD if your property is higher-end.
Overall, the Airbnb yields in Izmir are fairly similar to that of Istanbul, the difference being that the price points for attractive properties are much lower, and that it is much easier to break through in the local Airbnb market as the competition is not very professional. Continue reading this article to see a case study of an Airbnb investment in Izmir.
This is an issue all over Turkey. But Izmir has seen a considerable number of earthquakes, the latest being in 2020, when 700 buildings in Izmir were destroyed or terminally damaged.
However, new building follow strict regulations, and earthquake insurance is mandatory, so the fear of the impact of an earthquake is probably bigger than the actual potential impact, but it is nevertheless a seismic zone.
The general economic situation in Turkey
I won’t elaborate here as this would require a long academic essay. But in essence, Turkey’s currency has been nosediving because of a current account deficit and low forex reserves. The central government has been working on trying to fix this issue for many years, with many plans in place to develop the country’s energy sources, become a hub of energy trade in the region thanks to pipelines, and developing its agricultural sector. Energy and food imports are the country’s two weak links in the current account,
Unfortunately, years of international under-investment in the energy industry, due to the West’s focus on Environmental, Social, and Governance (ESG) concerns, and the West self-sanctioning itself from Russian oil, the energy markets are experiencing supply chain chaos and shortages. Turkey, as is the case with many developing countries, is on the receiving end of such price hikes.
Turkey has remained neutral between Russia and Ukraine, and even managed to be seen as a broker between the two. The result is better trade deals for energy from Russia, and for grain from Ukraine. The Turks are doing what they must to defend their national interest,
However, the reality remains that inflation is in the double digits, which is also driving the local real estate market as people seek hard assets.
Additionally, Turkey’s geographic location makes it a hotspot of geopolitical pressure, maneuvering, and intrigue. Negative external shocks are always a possibility in a region with many unfriendly neighbors.
My point is don’t go all-in Turkey, as you shouldn’t go all-in anywhere. Just be mindful of the risks.
3. The Izmir housing market
Istanbul prices per m2 are about 40% higher than in Izmir, though Izmir has seen marginally more growth since 2017.
These parabolic numbers are quite crazy to watch. But housing in Turkey has been tracking ahead of the Lira devaluation, with prices actually going UP in USD terms. Real estate has been playing its role as an inflation hedge, which is easier in a low mortgage market such as Turkey.
Most of the market in Turkey, especially in nicer neighbourhoods, is based on cash transactions. Mortgages are rarely used. Prices are even set / indexed to the USD in some areas as buyers are either foreign or local Turks with USD income. As Turkey is an export powerhouse, many wealthy Turks earn most of their money in hard currency, as opposed to Liras. This creates a (positive) distortion, and a healthy natural hedge in some neighbourhoods.
4. In which neighbourhoods to make a real estate investment in izmir
The “other side” of izmir. It’s the northern part of Izmir Bay, easily reached from the traditional side of Izmir by city train or ferry (great views). Traditionally, it was where the wealthy Izmerites had their Summer homes. It’s a very livable and pleasant area, with newer, more spacious buildings, and where the average resident is higher income than the average.
However, the market is too local, and there isn’t much business happening there. I just can’t build a real estate investment case in this part of Izmir. You might get bookings from Medical tourists due to some hospitals being in this area, but that’s about it.
This is the true center of Izmir. The best parts of the “promenade” are here, including all the bars, clubs, restaurants, etc. It’s the entertainment district. It’s a fun place, and very adequate for Airbnb due to the activities around, core location, and good public transport.
This being said, it’s not the most relaxing area. Anyone wishing to stay for a more extended period in Izmir, say more than a week or two, will probably want to stay somewhere else. Personally, I find that the prices there are too high for the value they offer. This is for the “core definition of Alsancak”.
Turks loosely extend the neighbouhood up to Gazi Boulevard. I find this area much nicer and more premium. Wealthy locals live here. I think the rentability is just as good, but offers a more livable lifestyle.
Absolutely not known by foreigners, the neighborhood of Bornova in the East of the city is quite cool. There is a little neighbouhood around Buyukpark which is close to a number of universities. It’s young, with a high density of bars, and the whole area is green and laid back.
But prices are not that much different from near the water, so I don’t think it would make a good investment. It is however an interesting lifestyle option for those that don’t care much about sea views.
Karatas / Konak
Formerly one of the main Jewish neighbourhoods, it is known for the famous Asansör clocktower, one of the city’s main tourist attractions.
Real estate prices are reasonable in this area, and it is well connected to the rest of the city by bus and metro. One can find apartments with stunning views for very reasonable prices. This is by far my favourite area for investment.
An example of a real estate investment in Izmir
This apartment of 70m2 net is located in in Karatas. The building is brand new, the apartment is located on the second floor.
This two-bedroom apartment would do very well on Airbnb as it is located in the core area of Konak, near Asansör and a metro station. Also, what makes it relatively unique is that it is a new building, with and elevator and a gorgeous sea-view.
The elevator is key as there is a lot of medical tourism in Izmir. If you can get a combo of elevator + sea-view + new building + non-Turkish interior design then your Airbnb will do well as it will stand out on the market.
Here is an estimate of the numbers looking at current prices in USD terms
|Purchase price including transfer tax & agency fees||$110,000|
|Furnishing, built-in closets, gas installation, etc||$10,000|
|Total purchase price all-in ($1,714 per m2 for 70m2)||$120,000|
|Peak season (mid June-mid May) 90 days x $80 per night x 80% occupancy||$5,760|
|Low season 275 x $50 per night x 50% occupancy||$6,875|
|Total yearly gross income||$12,635|
|Short-term agency management fee 20% of turnover||$2,527|
|Internet + TV cable $11 per month||$132|
|Water, Gas, Electricity $50 per month||$600|
|Yearly property tax||$50|
|Common charges in building $50 per month||$600|
|Net income before income tax||$8,226|
|Net rental yield before income tax||6.9%|
What I find attractive about this is that the rental yield is decent, and you get a very respectable apartment in a triple-A location in a large, growing business city of three million people.
I also did a video case study of this investment with Keith, my real estate buyer’s agent who works in both Istanbul and Izmir. Video here.
For those who are interested, such an investment would qualify towards the Citizenship by Investment programme, or even just residency
If you buy $400,000 or more of real estate in Turkey, you, your spouse, and your underage children qualify for Turkish citizenship. More information in this article here.
On its own, this apartment would qualify the owner for residency in Turkey / the right to live in Turkey – not citizenship.
Who is making a real estate investment in Izmir right for?
If you want to invest in Turkish real estate, but don’t want to pay Istanbul or Antalya prices, or feel that with your budget you can only get B grade listings, then definitely look into Izmir. With the right agent and patience you can find some very interesting deals.
It also makes for a lovely base to spend parts of the year. The food is just as good as in Istanbul, the airport is well-connected and compact, the people are (waaay) more relaxed, some of the best Mediterranean beaches are an hour’s drive away, as well as some of the world’s prime archeological centers.
And very little traffic. Which is a big plus compared to Istanbul 🙂
Speak to Keith, he helped me invest in real estate in Izmir
Keith is from Nova Scotia and has been living for many years in Turkey. He runs an agency out of Istanbul helping people invest in the real estate market there.
In the past year, recognizing the absolute value Izmir offers, he expanded his operations to cover the city. He can help you find an investment (or lifestyle) property, negotiate the deal, and then put you in touch with people to manage it. More information on Keith’s services here.
If you want to read more such articles on other real estate markets in the world, go to the bottom of my International Real Estate Services page.
Other articles on Turkey:
- Making a Real Estate Investment in Istanbul, Turkey – Overview and what to watch out for
- People received a free citizenship AND made money – This is how
- Don’t fall for this Real Estate and Citizenship trap in Turkey
- I bought an apartment in Istanbul
- Investing in a city of 15 million, with decent yields – and get a free passport
- One of the world’s easiest second residency programmes -Turkey
- Citizenship by Investment in Turkey, its timelines, exact fees, and traps to avoid
- Are all new buildings in Istanbul a bad investment? Istanbul Real Estate December ’21 update
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If you want to discuss your internationalization and diversification plans, book a consulting session or send me an email.