Turkey: Overview

RENTAL YIELDS

Good yields on Turkish apartments

Istanbul apartments' gross rental income can go higher than 8%. Average yield throughout the districts is 7%. Bigger apartments tend to have lower yields, with 250-sq. m apartments generating a yield of around 5.8%.

Apartment prices per sq. m, on the other hand, have an opposite trend with smaller apartments selling cheaper at €1,041 for a 60-sq. m apartment. On the average, units go for €1,439 per sq. m.

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TAXES AND COSTS

Rental income tax is high in Turkey

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	14.6%	21.7%	24.8%
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Source: Disclaimer

Rental Income: A 22% withholding tax is levied on rent payments for non residents who only earn rental income in Turkey.Net , rental income is taxed as ordinary taxable income at rates from 15% to 35%.

Capital Gains: Capital gains from sale of real estate are tax-exempt provided that the holding period is longer than four years. For properties owned less than four years, normal income tax rates apply.

Inheritance: Inheritance taxes vary from 1% to 10% depending on the relationship between the donor and recipient as well as the amount transferred.

Residents: There is no difference between the treatment of resident and non-resident foreign nationals.

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BUYING GUIDE

Total transaction costs are moderate in Turkey

Closing costs are moderate in Turkey. Total roundtrip transaction costs amount to 9.85% -10.75%. Real estate agent’s commission (6%) and title deed charge (3%)are shared equally by both parties. Other costs include stamp duty (0.75%) and registration fees (max of around 1%)

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LANDLORD AND TENANT

Turkish rental market generally favours tenants

Turkish laws are pro-tenant

Rents: Rents may be freely agreed at the beginning of rental contracts. There is no other form of rent control in Turkey.

Tenant Security:The parties of the lease may specify any duration period they wish. The lease is automatically extended for one more year, unless the landlord informs the tenant in writing at least fifteen days before the expiration date of the lease that it cannot be renewed.

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ECONOMIC GROWTH

Continued economic recovery in 2006

The Islamist-based Justice and Development Party, which won a landslide victory in November 2002, has been a powerful force behind resolving many of Turkey’s long-standing economic problems.

Prime Minister Recep Tayyip Erdogan early identified EU entry as his government’s key priority. He presiding over reforms to the court system and increased freedom of speech, long restricted my military influence. But most importantly, the new government presided over dramatically better management of the economy.

For decades, Turkey has suffered annual inflation of 25% to 106% per annum. Runaway inflation was successfully brought down from a decade’s old double-digit levels to a more acceptable 8.6% in 2004, and 8.2% in 2005. Though inflation has unexpectedly picked up to 10.5% in Q3 2006, due to the rise in oil prices and various supply shocks, the authorities will have no truck with renewed inflation, and a tightening of interest rates by 4% in June, and a further 0.25% tightening in July, is expected to squeeze the higher inflation out of the system.

Turkey has recently experienced a strong economic performance – a 5.8% growth in 2003, 8.9% in 2004 and 7.4% growth last year. Because of the tightening of interest rates, GDP growth to the third quarter of 2006 was a restrained 5.9%, and the full year figure is likely to come in lower.

Due to doubts expressed by EU countries such as France and Austria, analysts expect EU accession negotiations to be difficult and slow. Nevertheless, the attractions of the Turkish coast, its food, its natural beauty and its low costs, have sufficiently embedded themselves in the minds of Western Europeans that, whether EU membership materializes or not, there is no stopping Turkey’s upward momentum now.