Real estate in Turkey
The global economic crisis and political tensions have turned Turkey into a safe port for foreign investors. Especially after the Reciprocity Legislation, which has been referred to as a giant step in the real estate sector; many investors, who wished to evaluate the cash in their pockets, sped up their initiatives to buy land from Turkey.
While the demand and power of domestic investors to buy properties has fallen due to the economic conditions, foreign investors have been investing on new projects in Turkey even before any building work has been started. Looking at the averages, the narrowing in the internal demand is followed by above-average foreign purchases. In a survey conducted in 2013, the cities of the USA came at the top of the preferences of global commercial property investors, while Turkey moved up nine places to reach 4th place.
Which regions in Turkey are preferred by foreign investors?
While Antalya and Muğla are being preferred due to their climatic characteristics, the air / land transport facilities and their suitability for golf tourism, Istanbul is in first place for real estate purchase by a long way.
What is the advantage of a real estate investment fund for foreign investors?
Apart from the reliable investments made by foreign investors on the basis of companies, investments in Real Estate Investment Funds (REIF) are much more advantageous and safe. That is because there is a serious level of regulation over these funds. REIFs are exempt from corporation tax. They also have advantages in terms of withholding and income tax. Furthermore, the new possibility for foreign investors to acquire shares in the REIFs in our country is also a big advantage. Thus, when compared with buying real estate directly, investing in real estate funds, and buying real estate indirectly is much safer, faster and less costly.
What should foreign investors do?
Foreign real estate investors should act together with consultancy companies who know the region and the procedure. This is because the legal procedures, interest rates and the purchase of real estate in most countries differs. For instance, while annual interest rates in Europe are around 4%, in Turkey they are around 12%. Therefore, attention needs to be paid to the following during the process of choosing the land which carries the required characteristics for investment:
– Research should be carried out to determine the status of real estate. The analyses of the technical or legal problems which have been experienced should be performed. Any non-compliances with the law / relevant legislation, which have emerged or may emerge need to be resolved, the impact of these on the value of the real estate needs to be determined, and recommendations for a solution within the system in our country need to be put forward
– The required criteria for real estate for the purposes of investment need to be formulated, and a place which is suited to the characteristics required by the investment should be selected
– A project needs to be developed
– The practicality of the project which has been developed should be verified, and feasibility analyses should be performed.
Furthermore, the total area of the immovable properties acquired by foreign national real entities (those which are not companies) and their independent and permanent limited real rights may not exceed 10% of the surface area of the district which is the subject of the private ownership, and also may not exceed 30 hectares per person in the country in general. However, the council of ministers does have the authority to increase the limit of land which can be acquired by a person in the country in general, to double this amount.
What are the most suitable types of real estate for foreign investors?
15 percent of the properties being sold in Turkey are purchased by foreigners. Contrary to what is believed, it is the citizens of European countries that are at the top of the list of buyers, rather than Arabic citizens. As well as the geographical characteristics of Turkey, another factor is that Europeans have invested sufficiently in their own countries and now wish to spread out to overseas countries. It has been calculated that Arabic nations’ share in the sales which have been realised is around 20 percent.
It is believed that the most suitable item of real estate is land. Investors from the Middle East mostly prefer off plan (those sold from a plan, where the project is due to be completed in 1-2 years) properties. The investments made by European tourists on the south coast of Turkey in the past, and the fact that Middle Eastern tourists are also looking at the southern areas in recent times, can be shown as proof that investment is also being undertaken outside Istanbul. They are undertaking their investments by having houses built on the land they buy, by the contractors who they reach agreement with.
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Top image via Seqoya