Economy

Florida Of Europe? As Crisis Deepens, Euro Zone Retirees Look To Turkey

The euro zone’s lingering economic woes and ends to buying restrictions are making Turkey suddenly look like the place to be – especially for Western European retirees. Vacation homes go for as little as 130,000 euros. Pool included.

Easy going in Alanya (ozgurmulazimoglu)
Easy going in Alanya (ozgurmulazimoglu)

By Richard Haimann

DIE WELT/Worldcrunch

Apartments can be had starting at just 40,000 euros. And for 130,000 euros, a house with a pool. Thanks to its low real estate prices and living costs, Turkey is becoming exceptionally attractive for western European retirees who are afraid of the dwindling purchasing power of their pensions.

The euro crisis has German seniors seeking Turkey out as a safe haven. Ever more of them are buying inexpensive real estate there as a second or permanent home, according to Hans-Rainer Lindner, a partner in the German company Türkei-Objekte, which specializes in "dream properties in Turkey."

In Alanya, Turkey, Ibrahim Fide, owner of the Prima real estate company says the "typical German customer is over 60." Apartments on the Turkish Mediterranean coast that are available for the equivalent of 40,000 euros are new, two-room flats. Houses for 130,000 euros are free-standing, with 120 square meters of living space, terrace, garden, and swimming pool.

Living expenses including food are so low that "three kilos of tomatoes cost 80 euro cents," says Lindner. "A German couple could live comfortably in Turkey on 700 euros a month."

That makes the country very interesting to all those who fear the euro crisis is going to send prices shooting sky-high, and leave them with a pension that won't be sufficient.

Dwindling buying power

Turkey is not, however, immune to the turbulence of capital markets. Rising oil prices are driving up living costs. In its latest forecast, the Turkish Central Bank predicts a rise of 7.62% this year. Most affected would be the prices of electricity, oil, but also food.

Since the euro crisis started becoming increasingly critical last year, the euro has fallen against the Turkish lira. In the summer of 2011, one euro bought 2.55 lira: now it's only 2.32 lira. That means the buying power of the euro in Turkey has gone down by 9% within nine months.

This is due on the one hand to the fact that many Turks working in euro zone countries have transferred their savings back home to protect them from the turmoil of the crisis. Another factor is that Turkey's robust economy is increasingly drawing companies from the euro countries.

Automobile and machinery manufacturers, IT companies, and various providers from Germany, France, Italy, and the Netherlands have either set up in the country or have made production deals with Turkish companies. That fuels demand for liras.

"At the same time, you're seeing increased demand for real estate in Turkey," says Lindner. According to the Central Bank in Ankara, the Turkish economy grew by 7.5% in 2011. The Turkish Statistical Institute says that unemployment rates fell from 15% to 10.2% in 2011.

"A large middle class is in the process of growing in Turkey, and its members want to fulfill their dreams of owning their own home," Lindner says. "That means that in the next few years prices of apartments and houses are slowly but surely going to climb."

Expect more foreign property buyers

New laws intended to open the Turkish property market up to foreign buyers should further energize the market. Until now, only citizens of countries that allow Turkish citizens to buy property in their country have been allowed to buy land, apartments or houses in Turkey. The E.U. countries do permit this – but not the super-rich Persian Gulf countries.

The new Turkish law is expected to come into effect in September. Also to be lifted are the size limits for properties bought by foreigners; under the new laws, it will be possible for foreign buyers to purchase surfaces of up to 30 hectares without seeking special permission.

This will enliven Turkey's real estate market considerably, agents believe. "There will be a lot of buyers, particularly from the Gulf region," says Feyzullah Yetgin, general manager of Calik Real Estate. "Demand could rise significantly very soon," Prima owner Fide agrees.

A first wave of interest in Turkish properties began in 1997 in Germany, Great Britain, Austria and the Netherlands. More recently, buyers have benefitted from the wake of the financial crisis as many British home owners have been selling. To reduce the loans on their books, many banks in Britain froze loans for holiday homes, so during 2009 and 2010 many British owners were forced to sell, which brought prices down.

Last year, however, the market rose again. According to Turkish Statistical Institute figures, in the fourth quarter of 2011, real estate sales rose 21.8% as compared the same period the previous year.

"Anybody who's toying with the idea of buying a holiday property or a main home in Turkey should start researching the market right now," says Türkei-Objekte's Lindner.

Read the original story in German

Photo - ozgurmulazimoglu

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Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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