Long summers, stunning, sun-drenched beaches on the Aegean-Mediterranean coast, championship golf courses and Istanbul’s medieval grandeur and contemporary gloss make Turkey a great holiday destination. Additionally, the relatively low cost of living, stable economy and improving infrastructure have begun to attract not only retirees from Britain and other countries but also those looking to relocate. Encouraged by the combination of tourist appeal, economic stability and growth, more and more investors are showing interest in buy-to-let properties, drawn by expectations of good rental yields and realistic capital appreciation.
In contrast with that in much of the EU, the mood in Turkey is upbeat. After a relatively brief recession, the economy began to bounce back in Q4 2009 and grew significantly in Q1 2010 with GDP growth exceeding 11%. Subsequent quarters saw lower growth, leading to forecasts of around 6% average annual growth for 2010. With inflation at manageable levels, a sound banking system and improvements in infrastructure, the business environment appears favourable for foreign investors seeking safe and profitable investment opportunities. Consequently, demand for Turkish real estate has risen in 2010.
Economic growth, tourism and impending EU membership have led to increasing investment in infrastructure. While public funds are being invested in roads and airports, corporates are building golf courses, hotels, resorts and other tourist amenities. Popular destinations for international foreign investors as well as those looking for second or retirement homes are Istanbul, Antalya for golf tourism and Bordrum, Dalaman, Fethiye, Kusadasi and other towns and cities on the Aegean-Mediterranean coast. In Istanbul, the demand for residential property exceeds supply and some off-plan properties such as Crystal Heights have seen significant value appreciation on an annual basis.
Turkey’s popularity as a tourist destination – around 25 million tourists visit the country each year – has led to growing demand for buy-to-let properties and holiday homes. Many international investors now prefer to invest in Turkey than in Spain, France or Greece because the prices are lower and have the potential to appreciate considerably. Major tourist locations are witnessing an increasing demand from individual vacation home buyers for whom holiday properties in Italy, Greece, Spain and Portugal no longer look attractive or safe.
With roughly 70% of Turks under the age of 30, Turkey has a clear demographic advantage, which is expected to reflect positively on the economy in the years to come. Increasing urbanisation and a growing population will likely accelerate demand for housing, making real estate an attractive investment option. Currently, both domestic and international buyers are driving demand for real estate in Turkey. Investors with a medium to long term perspective might want to take advantage of the prevailing static prices and low interest rates to buy property in locations that are expected to witness high demand in the years ahead.
Some see Turkey’s EU candidacy as a positive for future real estate growth. In general, real estate values in Turkey are considerably lower than in the UK, Spain, France and other EU countries but EU membership could see property prices rise significantly as they have in the case of many other member countries. The membership process could take 5 to 10 years, which might be an opportune time for investments in Turkish real estate as prices are still relatively low.
Individual foreign real estate investment in Turkey is governed by the country’s reciprocity laws, which stipulate that a foreign national can purchase property in Turkey only if Turkish citizens are allowed to buy property in his country. As Turkish citizens are not barred from owning real estate in the US and many European countries, Americans and Europeans are permitted to own real estate in Turkey. Citizens from Iran, the Middle East and some other neighbouring countries are, however, currently restricted from investing in Turkish property because these countries do not have reciprocal arrangements with Turkey.
These stipulations are under review and the Ministry of Public Works and Housing has submitted a proposal aiming to ease some of the restrictions on foreign nationals of certain countries. If the legislation comes into effect, the real estate sector is expected to attract lucrative investments from the Middle East. Business investment is not subject to this law.
Financially and legally, Turkish real estate transactions are becoming easier to some extent for individual foreign buyers. They can now avail of local mortgages subject to terms and conditions. Also, recent amendments to the Land Registry Law pertaining to purchase of property by foreigners and to tax laws are expected to streamline property transactions, making real estate investment more feasible for foreigners.
Key facts about real estate investment for international buyers:
• Foreign nationals of countries that permit Turkish citizens to buy property there are permitted to invest in Turkish real estate.
• Turkey’s reciprocity law bars citizens of some countries from buying property in Turkey. Estate agents normally have lists of countries with reciprocal agreements.
• Reciprocity laws permitting, a foreigner can buy property subject to zoning schemes, the seller’s antecedents as well as legal restrictions. A thorough search should be conducted prior to purchase in order to rule out any legal exceptions.
• For a property purchase by a foreigner to be legally valid, it must be entered in the Land Registry. Real estate delivery takes place once the transaction has been entered in the Land Registry. Both procedures must be in accordance with the Turkish Civil Code.