Turkey

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Five years ago, Turkey allowed foreigners to buy property. As business booms, Graham Norwood looks at the options for city slickers and sun-worshippers

Perfect skies, blue seas, golden beaches – Turkey has got them all, but, for now at least, instead of being overrun with tourists, much of it remains relatively unspoilt, so ideal for holiday-home seekers.

Of the 51,044 homes owned by foreigners in Turkey in 2005, some 9,298 (or 18 per cent) are in UK hands, according to Turkish government data, up from just 2,420 in 2003.

Istanbul, straddling Europe and Asia, is increasingly popular and is serviced by budget airlines. “Istanbul is fuelled by domestic demand for rental property because locals prefer to rent than to buy. In addition, the city is beginning to draw foreign investors,” says Ali Ozturk of Regnum, a Turkish development company. He says that rental yields of 7 per cent to 9 per cent are possible, depending on the quality and location of the development.

Prime Istanbul locations for long-term investors include Levant, Akatlar and Etiler, all central areas mainly consisting of flats near shopping malls and the business centre. Areas such as Maslak, Besiktas and Ulus offer good views of the Bosphorus, while in hilly, older areas such as Bebek, Rumelihisari and Kemer there are more spacious family houses.

Within the city, about £30,000 will buy you a small new-build flat in a secondary location, probably without parking; for £60,000, you will get an apartment in an area more appealing to renters. But you need to spend £100,000-plus to get a property that is likely to appreciate and attract corporate tenants, while £200,000-plus buys a big house in a desirable suburb 30 minutes from the centre.

There is a similar variety of property and prices on the Turquoise Coast, the most sought-after area of Turkey where the Mediterranean and Aegean meet. The Newcastle-based Turkish Property Centre says that the most popular locations for British buyers are Bodrum and Fethiye, although less well-known areas, such as Antinkum and Kushadasi, are also popular. “In some places, you can buy flats close to the water for £20,000, although higher-quality developers are now moving in,” says a TPC spokesman.

Michael Doig of Colliers CRE, a British property consultancy that monitors Turkey’s housing market, says: “Like many countries that are becoming the focus of British residential investors, growth is estimated at anywhere from 10 to 40 per cent a year.”

Turkey’s Muslim conventions don’t prevail in resorts, but there are some idiosyncrasies that can catch out foreign buyers. In some areas, for example, it’s hard for Britons to buy a car without being full-time residents, and shipping large items to Turkey. is tricky and costly.

But the most significant problem until recently has been the country’s volatile economy. This has been a deterrent to property investors, especially as slow progress on reforms have led to faltering talks on Turkey’s EU membership.

As recently as 2001, the Turkish economy was associated with soaring inflation, black-market activity and high levels of national debt. Even in 2004, 40 per cent of government spending was on interest payments on debts. But in the last two years, to win support for EU membership, Turkey has changed.

The country has brought inflation down to its lowest level since the mid-1970s, annual growth is now a staggering 9 per cent, and it is setting up systems of land registry to prevent disputes over ownership.

“The transformation has been dramatic. The introduction of a mortgage system this year will stimulate demand for domestic housing and drive prices up. There’s been a liberalisation of foreign property-ownership laws, with new legislation in 2005, and the possibility of EU accession has increased foreign investment,” says Alise Crossick of Ready2Invest, a UK property consultancy.

Given the many agents now marketing to Britons, it is amazing that Turkey only allowed foreigners to buy property in 2001. In five years it has become popular, helped by the fact that all property is freehold and eligible for inheritance by spouses or offspring.

Turkey is already a firm favourite. And, for the moment at least, a competitively priced one.

How to buy

  • Britons can buy in Turkey providing the property lies within the boundaries of a city, town or village with over 2,000 residents, and not in a designated military zone.
  • A buyer chooses a property on sale and signs a contract with the seller and an official of the Property Registry Department.
  • A contract is drawn up setting out the agreed price and completion date with a deposit, usually 10 per cent or more, paid at this stage.
  • Applications to buy a property need to be agreed by the local council and Turkey’s Army Office – an unusual but obligatory part of the purchasing process, which can take up to eight weeks.
  • The balance is paid at a date negotiated between buyer and seller when the legal deeds are transferred on completion day.
  • Fees include estate-agency fees (3 per cent of purchase price); legal fees (about £100); purchase tax (£300); land registration fees (about £450); and compulsory earthquake insurance (£120).

Source: The Independent

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Eyeing substantial increases in property sales to overseas investors, Turkey has said it is to model new regulations along the lines of those in place in Spain, promoting construction new holiday home complexes to be sold off plan. The announcement came from Turkish Finance Minister Kemal Unakitan and Tourism Minister Atilla Koc on their return from a fact finding mission to Spain.

In the past the Turkish property market has been off limits to most foreigners. However, new regulations saw increasing sales to overseas investors in the years immediately before a constitutional challenge to those regulations last year. For example, just short of 2,900 properties were bought by foreign nationals in 2002, 4,000 in 2003, 9,000 in 2004, and 6,000 in 2005 up to the point at which sales were halted.

With a newly revised law, once again allowing properties to be purchased by overseas investors from countries offering Turkish nationals reciprocal rights, some 4,600 properties were snapped up by foreigners in the first six months of 2006.

Now that EU membership is a firm hope, Turkey is expecting the number of overseas property buyers to increase and is now planning for a building boom of Spanish proportions in Spain around 1m residential units mostly for summer use have been sold to overseas investors at an average price of around £123,000, Unakitan pointed out.

In comparison sales of Turkish property to overseas investors have so far been tiny only some 57,000 units in 83 years.

Currently 62,500 foreigners from 70 different nations own properties in Turkey. Originally most foreign buyers were Syrian, and Syrians still hold by far the largest area of land. However, more recently Brits and other Europeans have been buying the largest numbers of units.

According to Unakitan, there have been 14,500 UK buyers 14,400 German, 14,000 Greek, 3,100 Dutch and 2,500 Syrian since 1934.

He has asked Turkish officials to draw up plans for copying the Spanish model in which most developments are constructed as managed complexes, are sold off plan and are often marketing overseas scale models and artists impressions.

Source: Fly2let

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For many people Turkey has other advantages too: a friendly, exotic culture, great shopping and some of the best-preserved archaeological sites in the world. The Government’s successful economic reforms have also encouraged investors, and new laws make it easier for UK citizens to buy Turkish property and tourist numbers are rising by 25 per cent a year.

Turkey’s accession to the EU is still a decade away, however. David Cox, director of Property Frontiers, a UK-based agent, says: “Turkey is an interesting market. It has the potential to be the ‘new Spain’ – it has the fundamentals, a great climate and is a place people want to go on holiday to and retire to, but some of the supporting factors, politically and economically, haven’t happened yet. That is the gamble – that is the risk for the investor.”

The property boom is concentrated on the coastal resorts along the Aegean and Mediterranean seas, namely the fashionable Bodrum peninsula, Dalaman and Fethiye as well as the traditional seaside towns of Kas, Kalkan and Altinkum. In some resorts, prices are said to have risen by 100 per cent in the past two years. A more realistic guide would be 20 per cent per annum. On some developments the spectacular price rises are being driven by speculators rather than genuine holiday-home buyers. “Flipping” – when investors sell on off-plan contracts before the development is finished is also occurring. When the speculators move on to a new market, house prices may stagnate or even fall.

Dennis Phillips, of John Howell & Co, the international property lawyers, says: “In our view the trend of year-on-year appreciation will last one to two years before plateauing off.”

Plenty of new developments mean lots of choice for buyers but may also depress prices when it comes to selling or renting. Most visitors also come on package tours and access is still an issue. “Rental is still not that good in Turkey because the price of a flight is nearly as expensive as a package holiday,” Zena Ozguler, accounts manager at The Turkish Property Centre, says.

Investors are hoping the budget airlines will come to their aid, but they may have a long wait. EasyJet serves Istanbul, but not the coast and Mr Phillips says that most buyers will struggle to rent on a “decent commercial basis”. He advises: “Don”t expect to have a really strong market for a couple of years.”

In spite of this, Turkey deserves serious consideration, especially if you are looking for a property to use as a holiday home as well. If you have less than £40,000 look at Altinkum. Ms Ozguler says: “This is a great place to buy. It’s an up-and-coming, family-friendly beach resort that is attracting lots of new investment.”

The Turkish Property Centre recommends its own development, Miranda Gardens, just 500 metres from the beach, with apartments starting at £33,000. Property Republic, a London-based estate agent, is offering apartments from £58,000 in Yalikavak, a new upmarket holiday development zone about ten minutes’ drive from Bodrum.

Sources: Sunday Times

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Some 53,000 overseas property investors, mostly European, have bought houses in Turkey this year while some £1.15bn has been invested in real estate projects by overseas property investors.

The figures came from Haluk Sur, chairman of Turkey’s Association
of Real Estate Investment Companies, GYODER, when on a trade mission to the Middle East.

Expectations of EU membership, and local demand fuelled in part by more readily available mortgage finance, have contributed to a booming construction industry that has seen 20 per cent growth in the last year, said Sur. Housing loans from banks and financial institutions had totalled £4.4bn.

Turkey, which hopes to join the EU within five to 10 years, expects similar overseas property investment as in Spain where 1.7m residential units have been bought by EU citizens from other countries.

One possible hiccup is a review of the law permitting overseas property investment in Turkey.

Last March the country’s Constitutional Court ruled that a 2003 amendment to the law had not includes a sufficient level of restrictions and guarantees.

The amendment eased the requirement that only foreign buyers from countries that allowed Turkish nationals reciprocal rights should be permitted to acquire property in Turkey. It also allowed such foreign nationals to buy properties in villages for the first time. The move led to an immediate flood of foreign property investment.

Challenge to the change of law came from one of Turkey’s many opposition parties, the Republican People’s Party which argued that it breached a constitutional requirement to impose the same limits on foreigners that other nations impose on Turks. The Constitutional Court was unanimous in its agreement and said the Government should draft new regulations

Source: Fly-2Let