|20/01/2020||Moody’s sees surge in Turkey's home sales as sign of estate market recovery and boost to banking sector|
|15/01/2020||Property sales in Turkey surge by 47.7% in December 2019|
|17/12/2019||Property sales in Turkey increase by 54.4% in November 2019|
|18/11/2019||Property mortgage sales in Turkey increase over 5 times in October 2019|
|16/10/2019||Property sales in Turkey increase 15.4% in September 2019|
|18/09/2019||Property sales in Turkey increase 5.1% in August 2019|
PROPERTY IN TURKEY - INTRODUCTION
Property in Turkey
Over the last 15 years, there has been a dramatic increase in interest in Turkish real estate. The reasons for this growing interest are as follows :
1) Turkey has become an ever more popular destination and has been made ever more accessible through the arrival of more airlines, both standard and budget, flying to Turkey. More and more cities throughout the world now have direct flights to Turkey.
2) Turkey’s economy has remained very buoyant and continued to grow at rates above the world’s average. It is seen as an emerging market with many advantages because of its geographical location and young population.
3) The last 15 years has seen significant levels of direct foreign investment in Turkey. This has in turn resulted in an increase in the number of foreigners coming to work in Turkey.
4) House prices in particular have risen very rapidly in recent years and especially in Turkey’s biggest cities. This is despite the strong growth in construction activity which represents over 6% of GDP. Many contractors have resorted to borrowing heavily and in foreign currency to complete projects. There have been fears of a housing bubble, but demand still appears strong with growing interest from foreigners, especially from the Middle East , and of course with the advantage of a growing population. The mortgage market is growing but still in early stages of development, and most transactions are handled with cash payments. Here, sales are performed invariably in terms of a deposit, sometimes an interim payment, and then a final payment on completion of sales.
5) There has been much development in both office and residential property over the last 15 years. This has resulted in an abundance of attractive, well-located and modern property on the market, whether in high-rise buildings close to city centres, resident complexes in the city suburbs, or holiday villas in touristic regions.
6) New variety of properties have come onto the market. For example, serviced smart offices and virtual offices, short-term apart residences, and boutique hotels in and near city centres have been developed.
7) Property in the south of Turkey, where there is a warmer climate, lower cost of living, in addition to the availability of cheap property with good growth potential, is especially attractive to foreigners looking for a retirement home.
8) Though the Turkish lira remained fairly stable against foreign currencies over the decade to 2012, as of 2013 the Turkish lira has recorded significant falls such as 19.3% in 2013, 9.2% in 2014, 25.4% in 2015, 20.6% in 2016, and 7.4% in 2017. The Turkish lira has lost almost 5% in the first three months of 2018 alone. This gives foreigners an advantage in ensuring advantageous prices, but the inflation rate has been over 10% in the first quarter of 2018, and expected to increase.
9) Over the last decade, the Turkish government has significantly relaxed restrictions on the purchase of property by foreigners in Turkey. When Land Registry Law No. 2644 was amended by Law No. 6302, with effect from 18th May 2012, the condition of reciprocity for foreigners wishing to purchase property in Turkey was withdrawn. In 2013, regulations regarding the issuance of residence permits were relaxed. Foreigners purchasing property in Turkey are now granted a one year residency permit, which can be extended indefinitely as long as they maintain possession of their property.
10) At the beginning of 2017, the Turkish government introduced the incentive of Turkish citizenship for foreigners who have purchased at least one million US dollars worth of property in Turkey. There must however be confirmation that the property has not been sold for 3 years. The government has since exempted foreigners from paying 18% value-added tax (VAT) on property purchased in Turkey This exemption applies only to foreigners’ first property purchase in Turkey. Payment must be made in foreign currency and the property must not be sold within one year following the acquisition.
Guidance for Foreigners
There are a number of points which need to be looked into before committing to a purchase. These may be found on the UK government’s website, www.gov.uk/how-to-buy-property-in-turkey , which is a useful guide as to how to buy property in Turkey. Perhaps the most important point is that the buyer must be assured that the seller is the existing owner or their legal representative.
The above guide also notes that foreigners technically require military permission before being able to purchase property. The guide recommends that a period of 3 weeks should be allowed for this delay. The good news is that this formality has been relaxed in October of 2013 in that, for example, it is generally no longer required when foreigners have already been given permission to purchase property in that particular area. However, there will still be areas in Turkey which are considered militarily sensitive and where foreigners will not be allowed to purchase property.
It is to be noted that no final payment should be made to the seller before receipt of the above military permission, if required, or for any other reason. The sale is only complete or legal when the buyer visits the local District Land Registry Office (Tapu ve Kadastro Müdürlüğü) with the seller and signs the transfer agreement in the presence of the Tapu official and receives the title deeds.
There is a lands registry fee payable both by the buyer and seller. This is 2% of the “property statement value” as issued by the local District Land Registry Office and is payable both by the buyer and seller. Information on the taxes payable at time of sale is given in the Turkish government’s website www.mfa.gov.tr/guidance-for-foreigners.en.mfa . Other costs relating to the property will be the commission fee to be paid to the estates agent (generally 3% on sales value, subject to negotiation), earthquake insurance as required by law, and annual property tax. Annual property tax for real estate located outside of a metropolitan municipality area is 0.1% of the “property statement value” for residences, 0.2% for other buildings, 0.1% for land, 0.3% for land (with building permission), and 0% for farming land; and for real estate located inside of a metropolitan municipality is 0.2% of the “property statement value” for residences, 0.4% for other buildings, 0.2% for land, and 0.6% for land (with building permission).
Renting property is a more straightforward process. It is important that the contract be translated and understood. The conditions for the return of the deposit on vacation of the property should not be prohibitive. Commission is generally paid by the prospective tenant to the estate agent. This is up to 12% of the total annual rent and is negotiable. This should be agreed with the estate agent before any down payment is made.
It is important for foreigners to understand the legal aspects and procedures before they enter into a purchase or rental agreement for property. Obtaining the services of an independent lawyer, who has no connection with the seller, is especially advised when purchasing property.