As Turkey continues to progress as one of the most sought after emerging markets for property investing, several questions repeatedly arise from potential buyers considering the location. Below is a compilation of ten of the most frequently asked questions about Turkey as a property investment location.
1. What makes Turkey an interesting investment market?
Currently Turkish real estate is one of the strongest emerging international market growth sectors, showing excellent potential for continued demand and expansion. Capital growth for mid to long term investments, along with good rental yield potential are attracting investors to the country’s property sector.
Coupled with the country’s domestic market, demand for property currently exceeds supply, resulting in fast increasing real estate prices. Growth within the tourism sector and interest to re-locate are also areas creating further demand and a strong growth market.
The country features a youthful demographic with a highly skilled workforce with intentions to enter the real estate market, placing demands on supply and improvements to the mortgage financing sector. This market represents strength in the future re-sale and letting markets.
Turkey’s steadily expanding economy and government integration for bringing the country in line with EU accession requirements allow for strong future growth prospects.
Along with the excellent investment opportunities presented in the Turkish real estate sector, the possibility of gaining admission to the EU in the coming years is further fuelling demand. The pre-EU entry prices offer a competitive position within the European market.
2. Are there any restrictions for foreign buyers?
Most nationalities are freely able to purchase real estate in Turkey, although restrictions apply to some nationalities. Those who fall into a restricted category will require a legal ‘Letter of Invitation to Purchase’ prior to entering the country. If unsure, details can be obtained from an embassy or consulate.
Other restrictions relating to all foreign buyers are real estate purchases within restricted areas, such as military zones, along with restrictions relating to property over 30,000m2 without obtaining a special permit.
3. What are the associated purchasing costs?
Purchasing costs will amount to approximately 5% of the property sale price. Registration and Notary fees are between 0.1% and 1%, while Stamp Duty fees are 0.75%. Title Deed fees have temporarily been reduced from 1.5% to 1% to assist the housing market during the current economic climate.
4. What are the legal fees?
Legal fees are around 2% of the purchase price, with prices varying between different legal firms. Half of the legal fees may be required when signing the purchasing contract and the remainder on completion.
5. What are the taxes I can expect?
If opting to sell the property prior to completing 5 years ownership, capital gains taxes will be charged at 20%. Following 5 years ownership the property is free from capital gains. VAT at 1% is required on real estate with a surface area greater than 150m2. Other taxes include residential real estate tax is 0.1% of the property value, and rental income tax where different payment method options are available to suit the owner’s preferences.
Rental income is charged at between 15.6% and 24.8% payable by a ‘deduction method’ exempting expenses such as utilities, insurance and administrative costs, or the ‘lump sum method’ deducting 25% of the gross income.
6. Will I be able to arrange a mortgage?
The growth of the real estate market has opened up mortgage financing on Turkish property to foreign buyers in recent years. Both fixed and variable rates can be arranged, with financing available for both re-sale and off-plan properties.
7. What is the military clearance requirement?
Military clearance is arranged by the buyer’s solicitor prior to completing the property purchase. The documents are required to ensure the property is not located within a restricted zone including military land, or other land protected for cultural, historical or ecological purposes.
8. What is a typical payment schedule?
While payment schedules may vary between different developments or agent’s requirements, a typical payment schedule will require a holding deposit, reservation payment and reminder on completion. Holding deposits are often approximately €3,000 or £3,000, while reservation payments may vary between approximately 10% and 40% of the purchase price.
It is also possible that a development may have staged payment requirements throughout the construction process. Re-sale properties are likely to have different payment procedures to off-plan investments, with the full price payable on transfer of the title, minus the holding deposit.
9. What is the time zone and currency conversion rate?
The time zone of Turkey is GMT +2. The local currency is the Turkish Lira (TRY). As the currency rate changes, the following conversions should only be used as a general guide:
1 EUR = 2 TRY / 1 GBP = 2.4 TRY / 1 USD = 2.5 TRY
10. Do I need a visa to visit Turkey?
Depending upon nationality and intended duration of the visit to Turkey, a visa may be required. Contacting an embassy or consulate prior to arranging travel plans is advisable for details of full requirements. This will ensure complete and up to date information to avoid unpleasant surprises.