Turkey’s present economic success is surprising, to those brought up with the previous Turkey of currency crises, overspending governments, and military coups.
Turkey’s economic growth is now the fastest in Europe – a trend likely to continue, according to the OECD’s rosy projections for the long-term economic future. Why?
• the budget deficit is small
• the banking system is in remarkably good shape
• inflation is controlled
• the government is democratic, committed to deep-rooted reforms, and is almost certain to be re-elected in 2011.
Turkey’s good relations with Europe, despite the unofficial veto on Turkish entry to the European Union, guarantee it access to European markets.
The property market was hit by the crisis
The peak of the financial crisis saw sales both by Turks and by foreigners, especially in Antalia. Reeling from the effects of the global credit crunch and economic downturn, foreign property investors sold their holiday homes.
The lack of good-quality statistics makes it hard to judge the extent of the decline, but the Garanti Mortgage Index, although not inflation-adjusted, gives an impression. From June 2007 to the lowest point, property prices were:
• 15% down across Turkey as a whole
• 16.5% down in Istanbul
• 15% down in Bursa
• 15.5% down in Antalya.
In real terms residential property prices may have fallen 25%-30% across much of the country over the past three years.
Now, with house prices undervalued by European standards, strong population pressure, growing tourism, and low interest rates, housing loan volumes are growing rapidly.
Turkey seems a housing market with a lot of momentum. For a fuller overview of the Turkish residential property market, download The Global Property Guide’s latest September 2010 Report on the Turkish Residential Property Market.
Foreign individuals can freely buy up to 10% of property and land in officially zoned areas which includes cities, towns and resorts. Foreigners cannot buy properties inside and near military, strategic and security zones and foreigners must secure a clearance from the Aegean Army Command. According to the ATSO, it takes three to six months to receive an answer from the military regarding the clearance.
Turkey’s economic growth is now the fastest in Europe – a trend likely to continue, according to the OECD’s rosy projections for the long-term economic future. Why?
• the budget deficit is small
• the banking system is in remarkably good shape
• inflation is controlled
• the government is democratic, committed to deep-rooted reforms, and is almost certain to be re-elected in 2011.
Turkey’s good relations with Europe, despite the unofficial veto on Turkish entry to the European Union, guarantee it access to European markets.
The property market was hit by the crisis
The peak of the financial crisis saw sales both by Turks and by foreigners, especially in Antalia. Reeling from the effects of the global credit crunch and economic downturn, foreign property investors sold their holiday homes.
The lack of good-quality statistics makes it hard to judge the extent of the decline, but the Garanti Mortgage Index, although not inflation-adjusted, gives an impression. From June 2007 to the lowest point, property prices were:
• 15% down across Turkey as a whole
• 16.5% down in Istanbul
• 15% down in Bursa
• 15.5% down in Antalya.
In real terms residential property prices may have fallen 25%-30% across much of the country over the past three years.
Now, with house prices undervalued by European standards, strong population pressure, growing tourism, and low interest rates, housing loan volumes are growing rapidly. Turkey seems a housing market with a lot of momentum. For a fuller overview of the Turkish residential property market, download The Global Property Guide’s latest September 2010 Report on the Turkish Residential Property Market.
Foreign individuals can freely buy up to 10% of property and land in officially zoned areas which includes cities, towns and resorts. Foreigners cannot buy properties inside and near military, strategic and security zones and foreigners must secure a clearance from the Aegean Army Command. According to the ATSO, it takes three to six months to receive an answer from the military regarding the clearance.
Analysis of Turkey Residential Property Market »
RENTAL YIELDS
Last Updated: Mar 25, 2011
Apartments in the marvelously attractive Besiktas district are (of course) more expensive than elsewhere in Istanbul, with prices over €5,000 per square metre for the largest apartments. Lucky are those that live in this area of palaces and large houses, looking out onto the Bosporus!
Since last year yields for smaller apartments in Besiktas have improved. A 120 square metre apartment now yields a return of around 6.6%. Yields fall off at the higher sizes, which are much more expensive to buy per square metre.
True, better returns can be had in the noisier Beyoglu which, though it can still command very high sales prices, is a more ‘work-oriented’ district and can return rental yields on apartments of 5%-8.7%
Bakirkoy is a mixed district, and has a large range of houses and apartments and areas, with higher-end apartments at around €3,800 per square metre, and smaller apartments average €1,700 per square metre. Gross rental yields are around 6.4% on 120 square metre apartments – again slightly higher than last year.
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 disappointing, 120 square metre apartments here can return 3.5%
The very beautiful and wealthy Sariyer district is very expensive in its upper reaches, with residential property prices reaching over €3,000 per square metre. But smaller apartments are good value. Yields can be good, at around 6.9% on a 120 square metre apartment.
The varied Sisli district has apartments mostly over €2,000 per square metre, and yields of around 5% on 120 square metre apartments.
Since last year yields for smaller apartments in Besiktas have improved. A 120 square metre apartment now yields a return of around 6.6%. Yields fall off at the higher sizes, which are much more expensive to buy per square metre.
True, better returns can be had in the noisier Beyoglu which, though it can still command very high sales prices, is a more ‘work-oriented’ district and can return rental yields on apartments of 5%-8.7%
Bakirkoy is a mixed district, and has a large range of houses and apartments and areas, with higher-end apartments at around €3,800 per square metre, and smaller apartments average €1,700 per square metre. Gross rental yields are around 6.4% on 120 square metre apartments – again slightly higher than last year.
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 disappointing, 120 square metre apartments here can return 3.5%
The very beautiful and wealthy Sariyer district is very expensive in its upper reaches, with residential property prices reaching over €3,000 per square metre. But smaller apartments are good value. Yields can be good, at around 6.9% on a 120 square metre apartment.
The varied Sisli district has apartments mostly over €2,000 per square metre, and yields of around 5% on 120 square metre apartments.
TAXES AND COSTS
Last Updated: Aug 26, 2011
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%.
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%.
BUYING GUIDE
Last Updated: Apr 03, 2007
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%)
LANDLORD AND TENANT
Last Updated: Jul 10, 2006
Turkish laws are pro-tenantRents: 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.
ECONOMIC GROWTH
Last Updated: Sep 16, 2010
Turkey has come well out of the crisis
The year 2010 has so far seen Turkey recover dramatically from the crisis, with two quarters of above 10% GDP growth.
Turkey’s GDP grew by an average of 7.2% annually from 2002 to 2006, including an impressive 9.36% growth in 2004. GDP per capita rose from US$3,560 in 2002 to US$9,630 in 2007. The unemployment rate improved, and the budget deficit was pushed down to 1.6% of GDP by 2007, the lowest in 30 years.
The global economic slowdown and financial crisis however temporarily slowed Turkey’s growth momentum. But this period is now behind Turkey, and the OECD projects that Turkey is likely to see the highest rate of growth in Europe for the foreseeable future, partly due to its rapid population growth, its youthful population profile, and the rapid movement of large segments of the population from Eastern Turkey to the cities.
For decades, Turkey suffered periods of high inflation. But under the Justice and Develoment (AK) Party’s Tayyip Erdogan, Prime Minister since 2003, runaway inflation has been successfully brought down to manageable levels. Since 2004, inflation has been below 10%, a significant improvement from an average of 54% from 1999 – 2002, an average of 85% from 1995 – 1998, and 104% in 1994. Inflation was 8.7% in 2007, the lowest in more than two decades (however, it still one of the highest in Europe).
The AK Party, which won a landslide victory in November 2002 and July 2007, has resolved many of Turkey’s long-standing economic problems. The government has improved services and boosted economic growth. It has identified EU entry as a key priority. It has just won a referendum for change the Constitution, and is almost certain to be re-elected in the national elections of 2011.
Turkey was home to the Ottoman Empire, which once ruled much of Europe and Asia. Modern Turkey arose from its ashes with a secular state, the product of the nationalistic fervor that swept the country in the wake of World War I. That army-enforced secularism is now being somewhat unwound by the AK Party. Turkey has a mixed flavor of Islamic culture and Europe’s ancient and medieval civilization, recently rendered more mixed by the large numbers of scantily-clad North Europeans on its beaches.
Turkey’s GDP grew by an average of 7.2% annually from 2002 to 2006, including an impressive 9.36% growth in 2004. GDP per capita rose from US$3,560 in 2002 to US$9,630 in 2007. The unemployment rate improved, and the budget deficit was pushed down to 1.6% of GDP by 2007, the lowest in 30 years.
The global economic slowdown and financial crisis however temporarily slowed Turkey’s growth momentum. But this period is now behind Turkey, and the OECD projects that Turkey is likely to see the highest rate of growth in Europe for the foreseeable future, partly due to its rapid population growth, its youthful population profile, and the rapid movement of large segments of the population from Eastern Turkey to the cities.
For decades, Turkey suffered periods of high inflation. But under the Justice and Develoment (AK) Party’s Tayyip Erdogan, Prime Minister since 2003, runaway inflation has been successfully brought down to manageable levels. Since 2004, inflation has been below 10%, a significant improvement from an average of 54% from 1999 – 2002, an average of 85% from 1995 – 1998, and 104% in 1994. Inflation was 8.7% in 2007, the lowest in more than two decades (however, it still one of the highest in Europe).
The AK Party, which won a landslide victory in November 2002 and July 2007, has resolved many of Turkey’s long-standing economic problems. The government has improved services and boosted economic growth. It has identified EU entry as a key priority. It has just won a referendum for change the Constitution, and is almost certain to be re-elected in the national elections of 2011.
Turkey was home to the Ottoman Empire, which once ruled much of Europe and Asia. Modern Turkey arose from its ashes with a secular state, the product of the nationalistic fervor that swept the country in the wake of World War I. That army-enforced secularism is now being somewhat unwound by the AK Party. Turkey has a mixed flavor of Islamic culture and Europe’s ancient and medieval civilization, recently rendered more mixed by the large numbers of scantily-clad North Europeans on its beaches.
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