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Turkey has been abuzz over the past few years with talk about Arab purchases in the country, suggesting a significant flow of Arab money into real estate investments such as homes, business offices and land and direct investments in banks and industrial and commercial companies. “Arabs” usually means buyers from wealthy Gulf states such as Saudi Arabia, Qatar, the United Arab Emirates and Kuwait. But are Gulf investors really on a buying spree in Turkey?
Most recently, the issue of Arab acquisitions has made headlines as part of a simmering controversy over a government plan to build an artificial waterway in Istanbul as an alternative to the Bosporus. The planned waterway — called Canal Istanbul and dubbed a “crazy project” by President Recep Tayyip Erdogan himself when he first announced it in 2011 — is designed to link the Black and Marmara Seas in what is touted as an effort to reroute tanker traffic from the Bosporus and thus reduce safety risks for the city. Amid grave environmental concerns over the project, another issue that has come under scrutiny is the ownership of the land along the route, as plots on the would-be shores of the canal are being snapped up.
After Erdogan revived the project last month, details on how land has changed hands in an area of rising prices reached the public's attention. It turns out that Sheikha Moza bint Nasser, the mother of the Qatari emir, is among the buyers, having reportedly purchased 4.4 hectares of land in the area. Istanbul Mayor Ekrem Imamoglu, a member of the main opposition party and a staunch opponent of the project, said that Arab buyers had purchased significant stretches of land along the planned route, drawing attention to plans for residential construction on the banks of the canal. “Since 2011, 30 million square meters of land have changed hands along [the route of] Canal Istanbul. The three companies with the largest amount of land are Arab companies,” he said.
In response to a parliamentary question, Environment and Urban Affairs Minister Murat Kurum revealed that 11.2 million square meters of land in 59 provinces across Turkey belonged to Arab owners as of February 2019. In terms of location, Istanbul topped the list of the purchases, with 2.5 million square meters, followed by nearby Bursa with 1.2 million square meters, Sakarya with over a million square meters, Kocaeli with 940,000 square meters, Manisa with 607,000 square meters, Eskisehir with 423,000 square meters and the capital, Ankara, with 393,000 square meters. Saudis were the biggest buyers with purchases of 3.5 million square meters, followed by nationals of Kuwait, Iraq, Qatar and the UAE.
The Turkish Statistical Institute releases monthly housing figures compiled from title-deed registries. Iraq and Iran stand out in this category, outstripping most Gulf nations. Iraqis bought about 18% of some 143,000 homes sold to foreigners in the 2015-2019 period, followed by Iranians and Saudis with 9% each, Russians with 5% and Kuwaitis, Qataris and Emiratis with less than 5% each.
The financial worth of the purchases could be tracked from the central bank’s monthly balance of payments data, which includes foreign-exchange revenues from real estate sales. The figure stands at $52 billion in the 2003-2019 period, or $3 billion per year on average. In the same period, Turkey’s average exports per year amounted to $130 billion, meaning that real estate sales amount to only 2.3% of export revenues and that the fuss over foreign purchases is rather exaggerated.
In terms of direct investments and company acquisitions, the notion of overwhelming Arab interest seems to be similarly overblown. According to central bank figures, the eight Gulf countries had a share of only about 9% in the $133 billion direct investment stock in Turkey as of 2018. Europe was the undisputed leader, with nearly 77% of direct investments belonging to companies of European origin. The Netherlands alone had a share of some 25%, worth $33 billion. Direct investments from Europe’s economic giant Germany were worth about $10 billion, or 7.5% of the total.
The direct investments of Gulf countries, meanwhile, totaled about $12 billion. Qatar, whose ties with Turkey have flourished under Erdogan, stands out with a direct investment stock of $6.4 billion, followed by the UAE with $3 billion, Kuwait with $1 billion and Saudi Arabia with some $600 million.
Judging by the overall foreign direct investments of Gulf countries, their investments in Turkey are rather modest. Qatar’s FDI, for instance, is nearly $60 million, and Turkey’s share is around 10%. The Emirati FDI is worth $125 million, with Turkey’s share only about 2.5%. The combined FDI of Qatar, Saudi Arabia, Kuwait and the UAE is $321 billion, with Turkey’s share a mere 3.4%.
The most prominent Gulf investments in Turkey are in the financial sector, focusing especially on interest-free Islamic banking. Lenders such as Al Baraka Turk, Kuveyt Turk, Turkiye Finans and QNB Finansbank represent the Gulf’s main direct investments in Turkey’s financial sector.
In sum, any media buzz suggesting an Arab buying spree in Turkey is overblown. While real estate sales to foreigners account for less than 3% of Turkey’s export revenues, Gulf investors hold only 9% of direct foreign investments in the country. Qatar, which has built a special relationship with Erdogan, represents half of those investments, while the other Gulf heavyweights have been growing aloof to Ankara.
