Cutting-edge residential developments in Istanbul have been in the spotlight at Dubai’s Cityscape Global property exhibition this month, highlighting the demand for Turkish real estate in the region. Much of this interest has been fuelled by the removal of Turkey’s reciprocity law in May 2012, allowing Middle Eastern and other foreigners to take advantage of investment opportunities in the country. The figures support this — Gulf investors acquired 1,040 properties in the first half of 2013 alone, according to Turkey’s Ministry of Environment and Urban Planning.
For investors keen to tap into Turkey’s real estate market, here are ten tips to consider when purchasing property in the country.
1 Get to grips with the different property types and locations on offer in Turkey and be clear of your reasons for buying it. An apartment in a new Istanbul residential development, typically sold off-plan or as new build, can serve as a desirable city pad or safe buy-to-let investment. Districts in favour with investors include Beylikduzu, Halkali, Bahcesehir and Kurtkoy.
Meanwhile, Turkey’s many beach resorts are ideal places to own a rentable holiday home, with the Bodrum Peninsula being one of the most desirable areas. When choosing a location, consider transfer times to airports with international flights — for example, Bodrum has an airport, thereby widening its target rental market.
2 Turkey is a fast-moving, international marketplace where properties are bought and sold quickly in a number of currencies. Ideally, don’t make serious enquiries or visit the country until you are ready to invest and you have a deposit ready to hand over. Why? Acting prematurely means the market will have moved on by the time you are ready to purchase.
3 Be aware that while foreign investors can purchase freely in Turkey now, there are still areas where non-Turkish residents may not own or rent property, such as within designated military or security zones.
Also, foreigners may not own more than 30 hectares of property in Turkey, while no more than 10 per cent of property in dense urban areas may be owned by foreigners. The rules are different for companies, but your independent lawyer will be able to offer more advice on this.
4 Embracing a culture of international trade, real estate transactions in Turkey are done in a number of currencies — typically, the one that suits all parties involved in the deal.
To attract foreign buyers, investment opportunities in Istanbul are frequently advertised in dollars, more suited to Gulf investors, while more lifestyle properties on the coast are typically promoted in euros and sterling, more suited to European and UK second homeowners. Check any property you are interested in is not dual priced, i.e. has one price for foreign buyers and another, lower price, in Turkish lira for local buyers.
5 Understand the fee structure of your purchase. In Turkey, it is usual for buyers to pay an agency fee of up to 3 per cent of the purchase price when buying a resale property, with the vendor paying the same. However, when buying new build or off-plan when the vendor is a developer this should be waived.
6 Two documents critical to any property purchase in Turkey are the Iskan and Tapu, both awarded by the local authorities. Iskan is the Turkish equivalent of a habitation certificate and in a newly built development will usually be applied and paid for by the developer. Tapu is the Turkish equivalent to a property’s deed and proves ownership of a property.
7 As well as agency fees, other costs to consider in the Turkish buying process include stamp duty (4 per cent of the purchase price), notary fees of around $300 (around Dh1,102), independent legal fees (around $1,000) and a land registry fee (around $200).
It is a formality for all foreign buyers in Turkey to get military approval, which is a clearance that the buyer and their chosen property meet all appropriate ownership conditions. Approval should take six to eight weeks and comes from the local military office with a fee of around $200.
8 Be wary of new developments that are promoted with guaranteed rental income. Ask yourself if and how the developer can guarantee the return they are promising and who is guaranteeing it. Consider this when searching for a reputable agent or developer to buy from.
9 Off-plan buyers will need to make staged payments in line with the progress of construction of their project. If possible, pay as little in deposits and maximise your last payment due on completion, thereby leaving yourself less exposed during the build period in case there is a problem or delay with the development.
10 A final tip is to have realistic expectations about an exit strategy for your investment. Research the likely resale value and liquidity of the sector of the market you invest in. Bear in mind that after five years of ownership, property in Turkey incurs no capital gains tax.
— The writer is the Director at Turkey property specialist, Spot Blue International Property.
For more information visit http://www.spotblue.com