Turkey, a non-eurozone country with a warm climate, attractive coastlines, low cost of living and easy access from the UK and Ireland – is an attractive option for holidaymakers and second home buyers.

But it is not only demand for coastal holiday homes around the likes of Marmaris and Bodrum that has foreigners interested. Savvy investors are turning their attentions to rapidly growing cities such as Istanbul, the economic powerhouse of the country, which has a significant housing deficit.

Situated on the Bosphorus Strait it is the only city in world that spans both Europe and Asia. Conservative estimates put the population at 13m and present housing stock has reached capacity. With over 400,000 new inhabitants arriving each year to work or study – the megacity is exploding.

The success of Istanbul's property market is a simple matter of supply and demand. It is estimated that 250,000 new homes per year will be required until 2015 according to the Real Estate Investment Trust Association to meet the demand generated by foreign as well as domestic investment.

This undersupply coupled with a government scheme to replace older homes is driving the market forward. And reports are promising for this 2010 European City of Culture.

Earlier this year, Channel 4’s A Place in Sun predicted Turkey would be one of the top five locations for property investments in 2010.

The Financial Times listed it as a Top 10 place to safely buy residential or holiday homes. Price Water House Coopers and the Urban Land Institute rank Istanbul as the number one City Development Prospect in 2010.

“Property prices are undervalued so there's an opportunity to make good money in Istanbul - up to 40 per cent profit - in the next two years for a well-chosen off-plan investment,” says David Richardson, of Property Sun Turkey.

“But for most foreigners, I'd recommend a medium-term, five-year investment strategy as capital gains tax is nil after that period.”

Scheduled for completion in 2011 Tulip Turkuaz is a 1700 unit development in the Bahcesehir district of Istanbul. The project is 15 minutes’ drive from Ataturk Airport and 25 minutes from two main financial districts - Levent and Maslak.

Designed by internationally renowned architect and ecologist Ken Yeang, known for his eco-friendly buildings, there is an emphasis on bio-climatic facilities. Solar-energy, natural light channels and low energy electrical fittings are some of the 'green' features that should also help reduce energy bills.

Companies situated in the Bahcesehir area include logistic firms and car manufacturers such as Mercedes. With more firms on the way adding to the city's expanding middle-class - it is expected local executives would be potential tenants.

Tulip is a joint venture between two government housing development associations – (TOKi and Emlak Konut ) and Dutch property group Van Herk.

The project is under the guarantee of construction completion by the Turkish government. At a recent press conference, Turkish cabinet minister and chief EU negotiator Egemen Bagis backed the development saying: “We welcome British investment in our country and we are confident that those who buy from this scheme will become ambassadors for Turkey.”

Prices start from £48,000 for a one-bedroom, 70 sq m apartment to £201,000 for a four-bedroom apartment at 290sq m. A guaranteed net rental yield of 6 per cent per annum for the first five years of ownership is available with a choice to opt-out and switch to a rental management firm after three years.

Purchasing property in Istanbul is relatively straightforward with no restrictions on UK ownership. So far, 40% of the development has sold.

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Useful links

- Property Sun Turkey

- Tulip Turkuaz

- Ken Yeang

- Seda Consulting