Izmir draws Arab property cash amid Turkey’s economic turmoil

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Arab tourists in Izmir and neighbouring resort areas are becoming increasingly interested in the city as an investment as a holiday spot. (AFP)
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This picture is taken on April 10, 2018 in Istanbul shows a screen displaying foreign exchange rates against Turkish liras as people change their money at Istiklal avenue. (AFP)
Updated 11 May 2018

Izmir draws Arab property cash amid Turkey’s economic turmoil

  • Turkey's government last year eased restrictions on foreign buyers, exempting real estate purchases made with foreign currency
  • Real estate purchases by foreigners doubled last year, according to a report in March

Ankara: Turkey’s economic woes and collapsing currency is boosting interest in its real estate sector among Arab investors with Izmir proving a particular draw.

The country’s government last year eased restrictions on foreign buyers, exempting real estate purchases made with foreign currency from an 18 percent VAT charge, on condition that the purchased property is held for at least one year.
The exemption came a month after the government’s announcement that foreigners who buy real estate in the country worth $1 million or more (and which is subsequently held for at least three years) can get Turkish citizenship.
Real estate purchases by foreigners doubled last year, according to a report in March from local newspaper Daily Sabah, citing figures from the General Directorate of Land Registry and Cadastre.
Kate Everett-Allen, head of International Residential Research at Knight Frank, said key Gulf nationalities purchasing in Turkey include those from Iraq, Saudi Arabia and a smaller number from Kuwait and Iran.
“The majority of foreign buyers are purchasing small units in Istanbul, Antalya and coastal markets for investments, there is less foreign buyer activity at the prime end of the residential market,” Everett-Allen told Arab News.
The country’s third largest city of Izmir is proving especially popular with foreign buyers, including those from the Gulf.
The Western Anatolian city has emerged as the country’s hottest real sub-market.
Prices in the city increased by 18.5 percent during 2017 according to Knight Frank data, second only to Berlin in a survey of the world’s fastest growing real estate markets.

 

In March 2018, of 1849 houses sold to foreigners in Turkey, 181 of them were sold to Saudi investors, compared to 148 in March 2017.
Jameel Al-Hawamdeh, the CEO of Jordan-listed Emmar Real Estate Development and Investments, said: “(Buyers from) Gulf countries prefer big properties because of the number of children, income, lifestyle, while (customers from the) Levant choose apartments with a sea view, with one or two bedrooms, that are close to all services. Their decision is more related to budget and the usage of this apartment.”
The Turkish lira has sank about 13 percent against the dollar since the start of the year, with the US decision to pull out of the Iranian nuclear deal piling further pressure on the currency. Turkey is a major buyer of Iranian petroleum and gas.
The weak currency means that overseas investors, especially those from dollar-pegged economies in the Gulf, can buy more with their money.
With inflation running at almost 11 percent in the country, property is also a useful hedge against rising prices, which is drawing local investment into real estate.
Improving transport links between cities such as Izmir and the Gulf is also expected to boost property investment.
Saudia this week launched its first direct flight to Izmir. The daily service operates four-times-weekly from Jeddah and starting on June 10, Saudia will also be running flights three-times weekly from Riyadh. Izmir is the airliner’s third destination in Turkey after Istanbul and capital Ankara.
UAE-based low-cost carrier Air Arabia will also start a direct flight from June 27 with Izmir becoming the carrier’s fifth destination in the country after Istanbul, Antalya, Bodrum, and Trabzon.
Ibrahim Evduzen, a real estate investment consultant, said Arab tourists in Izmir and neighboring resort areas are becoming increasingly interested in the city as an investment opportunity as well as vacation spot.
“Arab tourists mainly prefer big-scale and private villas to use them as their summer vacation homes, while they also accord importance whether the house is guarded by a security detail,” Evduzen told Arab News.

FASTFACTS

Izmir Property

Izmir property prices jumped 18.5 percent during 2017.


INTERVIEW: Philip Morris International mideast chief on using hi-tech to progress toward a smoke-free future

Updated 18 August 2019

INTERVIEW: Philip Morris International mideast chief on using hi-tech to progress toward a smoke-free future

  • Tarkan Demirbas tells Arab News how smart technology will woo 9 million Gulf smokers and reduce risk

Alongside politics and religion, there is one other dinner party subject virtually guaranteed to push people to opposing extremes: Smoking.

In much of the world — especially the West but increasingly in the Middle East and other emerging markets — tobacco has been marginalized to the point where smokers feel shunned and lonely in many social environments, banished to pavements or poorly ventilated kiosks in airports.

After a series of multi-billion dollar lawsuits around the globe for the undoubted bad effects smoking has on health, Big Tobacco — the giant multinational companies that made billions out of the nicotine habit but neglected to say exactly how bad it was — is nowhere near as big as it once was.

All of which leaves Tarkan Demirbas with something of a challenge. He is vice president for the Middle East of one of the biggest tobacco companies, Philip Morris International (PMI).
Think Lucky Strike and the Marlboro Cowboy, legends of the industry and of marketing before grim, litigious reality overtook
the business.

BIO

BORN • 1968, Erzurum, Turkey.

EDUCATION • Bogazici University BSc Industrial engineering. • University of West Georgia, MBA.

CAREER  • Senior management positions at PMI in Hungary, Colombia, Malaysia, Singapore, Switzerland. • Vice President Middle East.

Demirbas is on message for the new anti-tobacco era. “There is no doubt that the best way to reduce the risks of smoking is to not smoke or use any nicotine product at all,” he said recently at an event in Dubai’s Capital Club, an oasis of tobacco-friendliness in the anti-smoking desert of the Dubai International Financial Centre.

On the surface, that seems a strange line from somebody who for the past 15 years has been promoting PMI’s products around the world, from southeast Asia through Budapest and on to Bogota with a stint at PMI’s Swiss HQ along the way.

But it coincides with a new direction PMI has taken. The new buzz-phrase in the company is “a smoke-free future.”

PMI launched the initiative with a “commitment and ambition to replace cigarettes as soon as possible with better alternatives to smoking for the millions of men and women who would otherwise continue to smoke.”

That might sound like turkeys voting for Christmas, but there is a sound business logic, as Demirbas explained. “The reality is that the vast majority of smokers simply do not quit. Even the World Health Organization’s own predictions forecast that there will continue to be more than 1 billion smokers by the year 2025,” he said.

“This is why a growing number of experts believe that public health policies should not be based solely on discouraging initiation and encouraging cessation, but need to leverage the potential of scientifically substantiated smoke-free products for the benefit of smokers and public health,” he added.

Technology is key to the campaign, and the product that PMI has come up with is IQOS. The Dubai event marked its regional launch. Imagine a slim mobile phone with a stubby cigarette sucking out of one end, encased it in a stylish carrying case-cum-charger, and you have an idea of IQOS.

Unlike other electronic smoking devices which vaporize nicotine juice, avoiding the harmful effects of the pathogens produced by burning tobacco, IQOS stays with the weed but does not burn it.

By heating tobacco sticks — called Heets — that look like mini-cigarettes to 350 degrees Celsius, the nicotine that smokers crave is released, but the tobacco is not burnt. Demirbas cites respected scientific sources as well as PMI’s own research indicating that 95 percent of the harmful by-products of tobacco are avoided.

Amid jokes that the Marlboro Cowboy would find it hard to use IQOS and ride his horse at the same time, nicotine-hooked cigarette smokers at the event said the result was pretty close to the “real thing.”

There is potentially a big market to go for, globally as well as regionally. Worldwide, some 150 million people use PMI’s tobacco products, still overwhelmingly traditional cigarettes. By 2025, he aims to get 40 million of those onto heated tobacco products like IQOS.

“This year, our priority is to go deeper into existing launch markets. We are encouraged by the results to date, including that there approximately 8 million smokers who have completely abandoned cigarettes and switched to IQOS. Japan is the best example of IQOS’ success, where we have achieved nearly 17 percent of the national share of the market,” he said.

IQOS is currently in nearly 50 markets, including Japan, Korea, Canada, a number of European countries such as Germany, the UK and Spain, as well as Russia, Ukraine and Colombia.

PMI passed a significant milestone in its campaign to go global with IQOS when the American Federal Drug Administration authorized IQOS and other variants. It will market its products in the US in partnership with Altria, the big investor which has made a commitment to the “smoke-free future” with multibillion dollar funding of Juul, the market leader in the worldwide vaping craze.

 “There are 40 million American men and women who smoke. Some of them will quit, but most won’t, and for them IQOS offers a smoke-free alternative to continued smoking,” Demirbas said.

Progress towards smoke freedom remains elusive in China, the world’s biggest market, where PMI markets Marlboro and in turn promotes traditional Chinese tobacco brands around the world.

The UAE joined the list of countries heading smoke-free last year when an IQOS stand appeared in Dubai International Airport’s duty free section. The UAE was ambivalent about the value of trying to lure smokers off tobacco and onto safer products, with the Emirates’ health authorities warning against the use of e-cigarettes and vaping devices. 

But the IQOS airport stand was a sign of a change of heart, and was followed by public pronouncements that vaping would also be made legal. Users in the UAE had previously resorted to some pretty furtive measures to get their nicotine fix, but non-tobacco nicotine products appeared to be here to stay, judged by the large numbers of people seen sucking on devices in many outdoor public places.

After the UAE launch, non-cigarette nicotine is going mainstream. The Heet sticks will be on sale for around DH20 (SR20) per pack — roughly the same as a pack of Marlboro — in most traditional smoking shops, while the devices — retailing at around Dh250 — will be sold in Carrefour supermarkets and, eventually, branded flagship stores.

Demirbas sees the UAE as a testing ground for expansion into other Middle Eastern markets, with Saudi Arabia high on the list of targets. PMI already knows there is an appetite for its device in the Kingdom from the large numbers of Saudi citizens buying them at Dubai airport.

At the airport, they have to present national ID cards or passports as proof of age — 18 is commonly the age limit for buying tobacco products in the Gulf region — as well as making a declaration that they are already smokers who wish to quit cigarettes. “I stress that we are trying to convert existing smokers, not trying to get anybody started on nicotine,” Demirbas said.

“From a public health standpoint, we see great potential for reduced risk products in Saudi Arabia. In our view, it is important to set the right regulatory framework to ensure companies adhere to best practices and comply with local legislation with the adult consumers of these products in mind, particularly as alternative forms of nicotine consumption are being recognized in leading global markets, including Saudi Arabia,” he said.

“Our ultimate goal is to convert all the 9 million adult smokers across the GCC, who would not otherwise quit, to IQOS,” he added.

PMI faces significant competition in its mission. Juul, the trendy but controversial device that has grabbed a big slice of the global market as the “iPhone of the vaping business.” Several other vaping products already have a foothold and a cachet that could be challenging for PMI.

At the Capital Club, the test audience for the IQOS launch was a mixed band of cigarette and vape users who gave the new product serious consideration. Some were sold on it straight away, others said they would give it a try and were gifted samples by PMI. The stylish look of the new product was a big selling point for the tech-style savvy consumers.

Others were put off by the charging process that has to be carried everywhere and used between smokes. One complained that the taste was simply too similar to the cigarettes he had been trying to kick for years.

As Big Tobacco seeks to reposition itself in the new anti-smoking age, the multibillion dollar nicotine industry will always be controversial. Maybe IQOS will be the hi-tech product that helps millions finally kick the smoking habit. Demirbas hopes so.

“We’ve invested $6 billion in it. It’s the most advanced technology there is,” he said.