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Last Updated: Oct 18, 2016




Turkey's property market continues to perform strongly, though price rises have been slowing since the beginning of 2016.

The country's nationwide house price index rose by 13.98% (4.76% inflation-adjusted) during the year to July 2016, according to the Central Bank of the Republic of Turkey (CBRT), significantly slower growth in real terms than the 18.75% (11.18% inflation-adjusted) growth recorded during the same month last year.
  • In Istanbul, Turkey’s largest city, house prices surged by 17.68% (8.17% inflation-adjusted) during the year to July 2016.
  • In Ankara, the country's capital, house prices were up by 9.16% y-o-y (0.34% inflation-adjusted) in July 2016.
  • In Izmir, the country's third largest city, house prices rose by 14.71% y-o-y (5.43% inflation-adjusted) in July 2016.

Istanbul also saw the highest annual increases in newbuild housing prices, with a 15.33% (6.01% inflation-adjusted) during the year to July 2016, followed by Izmir at 11.91% y-o-y (2.87% inflation-adjusted), and Ankara at 11.55% (2.54% inflation-adjusted), according to the CBRT. 

"Security concerns, Russian sanctions and mounting pressures on the lira are curtailing investment despite high demand and low supply characterising the wider property market," notes Kate Everett-Allen, Knight Frank's head of International residential research.

However the long-term outlook of the Turkish property market is still positive despite the failed coup attempt last July. “In the long-term, Turkey is likely to remain on the radar of investors, given the underlying market fundamentals of strong demand set against low supply,” according to Everett-Allen.

From 2007 to 2011, house prices in Turkey fell by 2% (-29% inflation-adjusted), as economic growth slowed sharply to 0.7% in 2008. In 2008 existing house prices plunged 14.65% after inflation, by 2.82% in 2009, by 3.54% in 2010 and by 2.39% in 2011.

Since then, home prices have risen continuously.

Foreign ownership in Turkey is ruled by the reciprocity principle. Citizens of countries that allow Turkish citizens or legal entities to own property in their country are allowed to acquire property in Turkey. Citizens of most EU countries (except for Belgium, Cyprus, Czech Republic and Slovakia), the United States, Canada and other countries in Asia, Latin America and Africa can freely purchase properties in Turkey.

Analysis of Turkey Residential Property Market »


RENTAL YIELDS
Last Updated: Mar 23, 2016



Istanbul has been enjoying a property boom, in local currency terms.  However over the past few years, gross rental yields for apartments have fallen significantly, due no doubt to various pressures on the Turkish economy.

Apartments in the marvellously attractive Besiktas district are somewhat more expensive than elsewhere in Istanbul, with prices of just above €3,740 per square metre for 120 square metre (sq. m.) apartments. However, this price premium does not now apply to smaller apartments, which are now a bargain, compared to elsewhere in the city, at around €2,500 per sq. m.. It is surprising that these apartments are not all snapped up by the Airbnb crowd. Lucky are those that live in this area of palaces and large houses, looking out onto the Bosporus! 

A 120 square metre apartment in Besiktas now yields a return of around 3.3%, versus 6.6% two years ago. Yields are of course much better at the smaller sizes, and we find that 60 sq. m. Besiktas apartments typically yield 5.5%.

Bakirkoy is a mixed district, and has a large range of houses and apartments and areas. Prices for small apartments are as high, or higher, than in Besiktas. Gross rental yields are around 3.7% on 120 square metre apartments – again significantly lower than three years ago.

True, as in previous years, better returns can be had in the noisier Beyoglu which is a more ‘work-oriented’ district. Yields have risen here since we last surveyed it, especially for smaller apartments. Yields are up to 6.1% for 50 sq. m. apartments. 

Kadikoy on the Anatolian side of the Bosporus is another very mixed district, buzzing with life and students, largely residential. As is to be expected, prices of residential apartments here have a wide range. This year we found yields in this district to be the slightly lower than last year, with 120 square metre apartments returning 4%.  Smaller apartments here have reasonable yields of 4.6%

The varied Sisli district has yields of 5.5% on 120 square metre apartments.

Round trip transaction costs are reasonable in Turkey. See our Poland transaction costs analysis and our Turkey transaction costs compared to other countries.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Aug 24, 2016



Rental Income: Net rental income is taxed at progressive 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 five years (four years if the property was acquired before 01 January 2007). For properties held less than five years (four years if the property was acquired before 01 January 2008), normal income tax rates apply.

Inheritance: Inheritance tax is imposed on the value of the inheritance at progressive rates, from 1% to 10%.

Residents: Residents are taxed on their worldwide income at progressive rates, from 15% to 35%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Aug 25, 2016



Total transaction costs are low in Turkey. The buyer pays for all transaction costs, which are around 8% to 11%of the property value.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jul 10, 2006



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.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Oct 18, 2016


Economy to expand in 2016 amidst uncertainty

Turkey gdp inflationTurkey saw a 3.1% increase in GDP during the year to Q2 2016, according to TurkStat. Private consumption rose robustly, expanding by 6.8%. Meanwhile, political uncertainty caused fixed investment to contract by 0.6% y-o-y. The economy is expected to grow by 3.8% in 2016, almost the same as in 2015, according to the IMF.

In September 2016, inflation eased to 7.28%, the lowest rate since May 2016. However, it is still above the central bank's target of 5%. In the first eight months of 2016, the government had a budget surplus of TRY 4.9 billion (US$ 1.64 billion), according to Finance Minister Naci Ağbal.

Unemployment was at 10.2% in June 2016, an increase of 0.6 percentage points from last year's 9.6%, according to TurkStat. The labour force participation was virtually unchanged at 52.4%, slightly up from 52.1% in the previous year.

The Turkish Lira fell to an all time low of TRY 3.09 against the US dollar on July 20, 2016, down by 14.5% from last year. As of October 3, 2016, the exchange rate closed at TRY 3.0187 = US$ 1.

A major reason for the currency's depreciation is the political turmoil in Turkey - the political risk brought by the failed coup attempt last July, which prompted the government to declare a state of emergency, led to a credit rating cut from two rating agencies. Standard & Poor's (S&P) cut Turkey's credit rating to 'BB' with negative outlook in July 2016. Two months later, Moody's Investor Service downgraded the country's credit rating to 'junk' status, cutting the government's long-term issuer and senior unsecured bond ratings from Baa3 to Ba1, but maintained the country's stable outlook stating that Turkey's "large and flexible economy" as well as its strong fiscal record, offset the "erosion in Turkey's economic resilience and increasing balance of payments pressures".

Another reason is the end of the period of rapid economic growth. Growth slowed sharply after the Eurozone crisis hit to 3.3% annually from 2012 to 2015, down from 9.2% and 8.8% in 2010 and 2011.

Another reason for the Lira´s weakness was the general weakening of developing country currencies. A final reason is the chaos on Turkey´s doorstep in Syria and Iraqi Kurdistan, and the deterioration in relations with Turkey´s own Kurdish population.

Political uncertainty ensues after a failed coup attempt
In the parliamentary elections on June 7, 2015 the Justice and Development Party (AKP) lost its majority, after 13 years in power. However, after coalition negotiations between the governing AKP and the opposition broke down, a snap election was called by President Recep Tayyip Erdoğan.

The snap election on November 1, 2015 resulted in a 'shock' victory for the AKP, which regained its parliamentary majority, winning 49.5% of the votes and 317 parliamentary seats. The Republican People's Party (CHP) gained 134 seats, the People's Democratic Party (HDP) 59 seats, and the Nationalist Movement Party (MHP) 41 seats.

Although President Erdoğan's AKP won the majority, it still has 14 seats too few to call a referendum to change the constitution and boost the president's powers.

In its early years, Turkey’s AKP government was seen internationally as the Islamic equivalent of Europe’s Christian Democratic parties, i.e., a force for moderation and modernity. The AKP was credited with bringing economic growth and political stability to Turkey. EU membership was one of the government’s top priorities. In September 2010 it won public approval for its plans to amend the constitution, partly to meet the requirements for EU membership, but above all to reduce further the power of the military.

However in recent years President Erdoğan has become increasingly authoritarian. Many journalists are in prison, violence against demonstrators is common, a bizarre purge of the military and of those associated with the Gülen movement has undermined judicial independence, and Erdoğan himself has been implicated in a wide-ranging corruption scandal.

The resignation of Prime Minister Ahmet Davutoğlu from his post in May 2016 heightened the concern regarding President Erdoğan's authoritarianism. Such move brought President Erdoğan's aim to move Turkey to a presidential system an inch closer, as Davutoğlu was replaced by a known Erdoğan loyalist, former transport minister Binali Yıldırım.

In July 2016, President Erdoğan's government was tested by a coup attempt by the faction within the Turkish Armed Forces, the "Peace at Home Council". It took over some key areas in Ankara and Istanbul and forced media outlets off the air. However, the coup was suppressed by military forces loyal to the state. The coup left 300 people dead, more than 2,000 others injured, and more than 6,000 people arrested.

The government linked the failed coup to President Erdoğan's rival Fethullah Gulen, a Muslim cleric and Erdoğan's rival who leads a popular movement known as Hizmet. Gulen, who currently resides in Saylorsburg, Pennsylvania after moving to the United States in 1999, denied the accusation.

A few days after the coup, President Erdoğan announced a three-month state of emergency. A series of purges has followed, with many arrests, and many firings, targeting people allegedly affiliated to Gulen's movement, but in fact spreading much wider.







  • Low costs in coastal areas
  • Moderate to high yields
  • Rapid economic growth
  • Low to moderate transaction costs
  • Pro-tenant rental market
  • Moderate to high income tax rates
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €3,037 For a 120 sq. m. property, usually an apartment.
Rental Yield: 3.79% For a 120 sq. m. property, usually an apartment.
Rent/month: €1,151 For a 120 sq. m. property.
Income Tax: 21.94% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 9.50% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

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