The Turkish economy grew at an annual rate of 5.5 percent in the third quarter of last year as record-low interest rates boosted consumer spending and investment. The buoyant economy offers prospects of rising rents and property values, contrasting with a sluggish outlook for Europe's economies as governments slash spending to reduce debt.
Istanbul "is one of the few markets where investors remain confident in the city rather than in their own ability to buck the general trend through superior real estate investment skills," PwC said.
Difficulties in obtaining loans to refinance debt or fund new projects continue to hurt the property industry across Europe and investment is going to the highest quality buildings in cities where tenant demand will lift rents, according to the report released today by the London-based arm of PwC, the world's largest accounting firm.
Best and Worst
London and Munich joined Istanbul in the top three of the rankings. Dublin ranked lowest in all three categories and Athens the next lowest, reflecting concerns about spiraling budget deficits in Ireland and Greece that forced both countries to accept financial rescue packages from the European Union and the International Monetary Fund.
"There is a broad consensus that there is little positive to be said about Dublin or Athens," the report said. "The broad concern about the state of the European economy remains a key theme."
Respondents to the PwC survey expressed "cautious optimism" about Germany. Last month, a poll of unlisted real estate fund manages by Amsterdam-based Inrev showed that Germany was their most-favored country because of its export-led economic recovery.
Berlin, Frankfurt and Hamburg also featured alongside Munich in the top 10 cities for returns from existing buildings, acquisitions and property development prospects. London was third for the performance of existing property and second for new acquisitions and development.
"With capital so risk-averse, winning cities like London and Paris will continue to absorb investment as the only places where tenant demand will be robust," PwC said.
London led the world last year for investments in existing buildings, with a total of $23.9 billion commercial real estate sales, according to data compiled by New York-based Real Capital Analytics Inc. A weaker pound and prospects for rising rents enhanced the U.K. capital's status as a refuge for investors, the data research company said.
PwC compiled the study with the Urban Land Institute by surveying the continent's largest property investors, companies, brokers, asset managers, banks and analysts.
To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.
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