Turkey – the country

With its wonderful climate, charming towns and villages, golden beaches, wealth of history and friendly, hospitable people, Turkey is becoming increasingly popular for foreigners buying homes in the Mediterranean. Also buying property in Turkey is seen as a good future investment considering the fact that Turkey is on the verge of becoming a member of the EU and is one of the fastest growing emerging markets in the world. Foreign citizens are increasingly interested in purchasing property in Turkey particularly along the southern and western coasts In recent years, Turkey has become a major tourist destination in Europe. With the rapid development of both summer and winter resorts, more and more people from around the world cane to enjoy the history, culture, and beautiful sites the country has to offer.

Why Turkey?

• Turkey is just entering the EU process which means there remains another 5-10 years of European investor interest in property. • Turkey is just at the beginning of a property boom. • Turkish economy is very strong with 5.5% GDP growth in 2005. • Stunning beaches and climate make it a very popular holiday destination. • You can still find excellent front-line properties for excellent value for money with high capital growth potential. • Turkish summers are a lot longer than in many other EU destinations, offering more hours of sunshine per annum. • Turkey has a huge population of 70+ million. This creates a strong internal property market meaning investors are not reliant on international investors for re-sales. • Turkish population growth is around 2% per annum with 70% of the population younger than 30, this creates a strong local market. • Over 25 million tourists visit Turkey each year boosting the property market and creating strong "buy to let" possibilities. • Low cost of living and long summers make it a favourite retirement spot for the Europeans. • Huge golf tourism evolving in Antalya which will increase the value of any investment Turkey offers a modern infrastructure. • Turkey is considered to be a highly dynamic country by the World Trade Organisation. • Land prices are on the increase while the property market evolves. • No capital gains tax after 4 years.

Can foreign nationals own property in Turkey?

Turkey works on a reciprocal agreement and if Turkish citizens are permitted to buy a property in their country, citizens from that country are allowed to buy in Turkey. With Turkey set to join the EU in 2007 this has opened its doors to allow citizens from many different countries to buy a property in Turkey in line with EU law. Foreigners are allowed to buy property or land in their own names in towns but not in villages or rural areas.

What is the economic and political situation?

Turkey is a dynamic and emerging market equipped with a well-developed infrastructure and a globally competitive work force. Turkey is also home to a thriving tourist industry and rapidly growing property market, attracting huge international interest. The Turkish property market currently offers excellent quality and value for money. This, combined with the outstanding expected growth (25-40% per annum), offers property investors a unique opportunity. Turkey is currently at the very start of the long road to possible EU inclusion. When Turkey does get accepted into the EU, it can expect the price of property to rise substantially and tourism to improve even further. Many investors are purchasing in Turkey with EU inclusion as a major driving force for this investment, while they look to take advantage of the current low property prices and a growing rental market. Turkish economy is very strong with 5.6% GDP growth in 2005 and Turkey now has the 22nd largest economy in the world. Turkey’s system of government is democratic and it is a full member of NATO.

How do we travel to Turkey?

In line with the boom in tourism, low cost airlines such as Turkish Airlines are already planning new routes, lower fares and increased services to cater for the increased numbers of visitors. As accessibility increases, Turkish property will become even more sought after and investors will inevitably see encouraging capital appreciation. The main points of entry for investors in Turkey are Bodrum, Dalaman or Antalya, with bookings from Turkish Airlines, British Airways, Thomas Cook and Excel. In winter, daily flights to Bodrum are available from Heathrow with transfer in Istanbul to Bodrum. However in summer, you can fly to Bodrum direct from most UK airports.

What is the direct flying time from UK to Turkey?

Flight time is only approximately 3 ½ hours from the UK.

Is a visa required to enter Turkey?

Entering Turkey is simple and visitors from many EU countries and New Zealand are free to enter Turkey without the need for a visa. You are well advised to apply to the Turkish Government Office for a Residents Visa if you are relocating to Turkey for more than 6 months. The document they issue will need to be taken to the police station for processing.

Investment

With the current market still showing so much future potential many investors are willing to invest in property in Turkey and target good capital growth but over a longer period of time. This involves the investor simply completing on the property and either executing the "Buy to Let" strategy or waiting patiently for the property value to rise and choosing the time to re-sale the investment. According to many investment experts, capital appreciation in beach areas is expected to increase initially by 50% and then by 100% over the next two to three years. For example, capital growth in the Bodrum area over the next 2 years is predicted to be in the region of 40-50 %. Off-Plan Property Turkey is a tipped as an area of huge investment growth potential. Whether it is an off-plan villa, townhouse or apartment you are interested in, buying off-plan allows you the opportunity to purchase at the best possible price and allows maximum capital appreciation. Buying off-plan in Turkey at this time allows investors to purchase property at the lowest possible price and with the best possible finance options in areas that will attract major rental demand and high price appreciation. Investors buying property in Turkey usually look to follow the "buy-to-let" model by purchasing a Turkish property then seeking to rent to the growing numbers of tourists for solid rental yields. During this period, the investor will expect the property value to continue increasing and the value of their investment to rise substantially. Currently property prices in Turkey are rising by 25-40% per annum.

Buy to let

Turkey is a very unique market. It has so much to offer the overseas property investor at this moment in time that it is becoming ultra popular with buyers looking for a new market in which to generate substantial return on initial investment. Usually emerging markets can present a high level of risk to an investor who purchases property with the view of using a "buy to let" investment model as they are relying on the growth of tourism to provide a constant stream of visitors wishing to rent their property. In Turkey this tourism is already very present and growing at a rapid rate, meaning that there is already a substantial and growing demand for "buy to let" property. In addition to the massive potential for lucrative holiday rentals the huge Turkish population (70 Million +) also means that there is large scope for long term rental. Because of the quality locations and build specifications of many of the best developments along the Turkish coastline many Turkish nationals are keen to purchase holiday homes here and it is estimated that if EU inclusion is granted then Turkish nationals will generally have more available funds and be in a position to purchase quality property in quality areas. The massive volume of tourism pouring into the main Turkey resorts is also creating a demand for long term accommodation for the tourist service industry, which is re-locating to the area to service the demands of the growing numbers of tourists. In general the "buy to let" market in Turkey is very healthy and is a major reason why Turkey appeals to investors in overseas property.

Short-Term Letting v Long-Term Letting

It’s obvious that the highest income is made by the property owner by letting out short term during the high season. However, you can off-set this against the increased overheads in constantly finding short term rental clients and the maintenance costs between clients. Long term rentals typically pay less on a month on month basis but usually require far less input from the property owner and the rental income is fixed over the course of the year. Some property owners choose to rent long term during the low season and then short term to higher paying holiday clients during the high season. The decisions to be made on your letting strategy are usually answered in part by the property you purchase. Some properties lend themselves to short term holiday makers and others to long term locals as a permanent home.

THE PURCHASE CONTRACT

Buying property in an emerging market such as Turkey is very different from buying in a more traditional market like Spain, where millions of buyers already own homes from all corners of the world. In Spain the procedures are tried and tested and every notary is well experienced. However, in Turkey this is not the case and the lack of experience and firm procedures may lead to delays and confusion. Once you have found your ideal property in Turkey and have decided that you would like to purchase you can usually expect to follow the procedure below: Reservation Contract The reservation contract takes the property off the market, usually for between 2 - 4 weeks, allowing time for the appointed legal advisor to carry out the required searches on the property in question. Usually a reservation fee of between €3,000 and €6,000 is paid at this point. Preliminary Contract After the reservation contract is signed and the required fee is paid, you are presented with a report containing the findings of the legal checks. Subject to the report, you then sign the preliminary contract and at this stage you will be expected to pay the required deposit. On a resale property, this is typically 10% and on an off-plan (new) property you must expect to pay varying amounts of around 30%. Completion Once all parties are ready to precede the property sale is completed. The buyer pays the required tax payments and the final contract or deed of sale (Tapu) is signed. The signing of this document means that the land ownership is transferred to the buyer. This is usually done at the land registry office. Once signed, the deed of sale (Tapu) is registered in the land registry.

COST and TAXES

• A 1.5% tax (stamp duty) based on the declared price of the property • Other costs 0.3% (Donation to education funds, etc.) • Property tax, paid annually to the local government at the rate of 0.3 % of the declared value of the property. Revaluation is conducted by the local government every five years. • Earthquake insurance required by law. Depends on property price and location. • New properties are exempt from the annual property tax for five years. • Property may be sold to Turkish, or foreign nationals without any restriction and the proceeds of the sale can be converted to any currency and transferable to any country you have selected. • Capital gains made from the sale of a property are taxable. However, individuals do not have to pay capital gains, provided that they have owned the property for more than 5 years.

MORTGAGES

The Turkish property market is becoming even more obtainable for foreign buyers with the imminent introduction of Turkish mortgage options. Until now, the absence of finance from Turkish banks has been a sticking point amongst many investors. Property purchasers traditionally arrange funding in their country of residence. However, there has been some recent movement on the Turkish mortgage front, making it possible in the very near future for Turkish residents to obtain mortgages. This is also expected to include non-residents within 6 months. Clients are deciding to take advantage of the excellent early opportunities available now in Turkey. Instead of a Turkish mortgage they may also consider: ? re-mortgage of their existing property ? use of personal funds ? arrangement of a personal loan Once the Turkish mortgage is implemented, it will doubtless enhance Turkey’s position on the property investment map. This, in turn, will further boost this flourishing tourist economy and inevitably drive property prices upward.

Talk to us today

If you would like to find out more about buying property abroad through Volcano Estates, simply contact us today on (0034) 928-51.87.52, or by e-mail, for an immediate response.