Thanks to the turmoil in the Turkish monetary system, the future looks bright for real estate investors, explains real estate expert Cameron Deggin.
The director of the Property Turkey agency says that the appointment of the new governor of the Central Bank, Nation Agbal, and the new Minister of Finance, Lutfi Elvan, is a significant move in several ways.
“These two new appointments signaled a positive attitude towards international markets that Turkey wants to strengthen the lira and the economy,” Deggin said.
Elvan’s replacement of Berat Albayrat as finance minister was significant, Deggin explains. Albayrat is President Erdogan’s son-in-law, and Erdogan has drawn criticism over the appointment, Deggin said.
The critique is well-founded. “During Albayrat’s tenure as finance minister, he didn’t show a very convincing front in terms of finances.”
However, his replacement looks promising, Deggin said. And that was born in the economy: in the three months since the new appointments, the lira has recovered, increasing by 23%.
The turmoil also signaled a move away from the Erdogan-dominated monetary system, which has long favored low interest rates, Deggin explains.
“The main signal that Turkey is giving to international markets is that Erdogan’s influence is not so strong and that he is no longer interfering in interest rates. This shows the independence of the Turkish Central Bank, as well as its monetary mechanisms.”
Despite Erdogan’s pressure, central bank governor Agbal announced that the bank intends to advance in the market, which could include a rapid rise in interest rates if there are signs that inflation, which is now 15%, could start rising.
“It does not seem possible to put interest rate cuts on the agenda for long this year,” Agbal said this month, adding that consumer prices are likely to rise for several months before falling to the bank’s 9.4% year-on-year forecast.
This will have a positive impact on the Turkish lira, Deggin explains. “The higher the interest rates, the higher the deposits received, which in turn strengthens the currency.”
Prognosis of healthy growth
Earlier this month, HSBC revised its growth forecast for Turkey for 2021, doubling its forecast from 2.1% to 4.2%.
Wall Street bank JP Morgan also increased its forecast figure from 3.3% to 4.6%.
When you add a positive outlook to financial shocks, it’s no wonder the lira is getting stronger, Deggin says.
For real estate investors, he has a short, sharp message: “It’s time to invest: now.”
“In the next three or four years, Turkey will prosper. Come in now and grow with the country.”