ECONOMICS > Turkey’s real estate sector risks losing foreign buyers

ISTANBUL - Hürriyet Daily News

The complexity of a new real estate tax system, which is also increasing costs, may not be welcomed by foreign buyers, according to sector professionals. However, the shift promises a short time rise

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This aerial photo shows a scene from Alanya, a popular tourism destination in the southern province of Antalya, where many foreigners from various countries are buying land or houses. DHA photo

This aerial photo shows a scene from Alanya, a popular tourism destination in the southern province of Antalya, where many foreigners from various countries are buying land or houses. DHA photo

Zeynep Topaloğlu Zeynep Topaloğlu zeyenp.topaloglu@hdn.com.tr

The increased tax burden and greater complexity of a new real estate tax system may discourage foreign investors, according to actors in the real estate sector.

The new value added tax (VAT) law, which will especially impact small luxury houses located in metropolitan areas, smaller than 150 square meters and licensed by the end of 2013, could intimidate property buyers because of a remarkable price increase, they said.

The sector had been witnessing an increase in foreign real estate acquisitions since the enactment of a bill removing the condition of reciprocity and eased restrictions on the sale of land and real estate to foreign citizens and firms in May of last year. In May alone foreign real estate acquisitions in Turkey reached $1.1 billion, which is four times the total number in 2011.

Nearly 112,300 foreigners have bought 90,000 properties equivalent to 24.1 million square metres area in only top ten Turkish cities, while Antalya is the leading province where 34,078 properties has been sold, according to December 2012 data provided by Environment and Urban Planning inventory.

The new tax will put the Turkish real estate sector in a disadvantageous position against its global
rivals, Ömer Faruk Çelik, chief executive officer of Sinpaş REIT, told the Hürriyet Daily News. “Real estate demand was stuck at around 400,000 sales for several years, and the new tax will pull down the sales even lower.”

In addition to the price surge, foreign real estate investors might refrain from buying real estate properties because of the difficulty of comprehending the puzzling structure of the new system, said Gürler Ünlü, chairman of the Real Estate Strategy Platform (GISP).

Six variables

Under the new system the tax amounts are determined by the Ministerial Council with regards to six different variables – size in square meters, value of one square meter, luxury house status, license year, the neighborhood and the status of the city (metropolitan or not) – which makes it harder for foreign investors to understand the system.

Sector players are experiencing a short-term rise in property sales since the new regulation applies to houses licensed from 2013 on. The marketability of the houses licensed prior to the regulation is anticipated to rise.

The Association of Real Estate Investment Companies (GYODER) has pulled its 2013 growth forecast for the construction sector down 1 or 2 percent due to the VAT increase, also claiming that five companies may postpone IPO plans because of the possibility of the addition of another tax burden on property developers.

Even if the impact of the regulation is not seen on the sales it will be seen in the new project investments in 2013, Işık Gökkaya, chairman of the board of directors of GYODER, told Reuters.

Firm gets $2.3 bln contract

ANKARA – Anatolian News Agency

Turkish contractors rang in 2013 with a good start, winning nearly $3 billion worth of contracts in Turkmenistan, Kazakhstan and Georgia in the first two weeks of 2013, mainly due to a large Turkmenistan project, Economy Minister Zafer Çağlayan has said.

In his written statement the minister praised the recent contract of Polimeks, which won a $2.253 billion tender for Ashgabat Airport. Up till today, Turkish contractors have undertaken $31 billion worth of projects in Turkmenistan.

Russia leads Turkmenistan as the first country where Turkish contractors have undersigned projects most.


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Notice on comments

Brit in Turkey

1/15/2013 6:40:42 PM

Tim Wright. No-one is making money out of property in the present market. Too many houses/ apartments were built in the boom of 4 years ago. By your logic a Turk buying a property in UK should only pay the price he would pay in Turkey. Utter nonsense. What you are forgetting are all those foreigners who buy and stay here. They bring money into the country, spend in local businesses, employ local workers, and can't escape paying tax on investments, medical, permits, driving licences and the rest.

Brit in Turkey

1/14/2013 8:37:45 PM

A final point: Do not hand over the balance of the purchase price until you have the Tapu (the deeds) document in your hand properly drawn up and authorised at the deeds office. Whoever has this document, in their name, is deemed to be the owner. Do not believe an agent who promises he will get it or hold it for you.

Brit in Turkey

1/14/2013 8:17:27 PM

Another point: buy only what you can see, and not "off plan". Builders and agents are not unknown to do a runner with the deposits! Preferably buy direct from the owner and do not hand over the deposit to an agent or worse still a waiter. We hear of horror stories of people handing over £100,000 plus only never to see the waiter again! Would you do that in the UK? Have your wits about you.

Brit in Turkey

1/14/2013 8:11:44 PM

Buying property in Turkey is not the nightmare it can be if handled properly. The biggest stumbling block is the inordinate amount of time it takes for the "Army permission" to come through. Pay no more than 10% to the owner (not agent) before clearance and only with a proper notarised receipt. Get a trustworthy solicitor and an intelligent friend (not a waiter!) to advise you. Rely on recommendations for these. Beware crooked pseudo-lawyers (there was at least one crook on the embassy web site)

Tim Wright

1/14/2013 7:26:24 PM

I agree with Turk Uzan. Sell the properties at prices that foreigners need to pay at home. I disagree with Mara. What do you think this foreingers are doing? The are buying cheap property and forcing the price up for locals, Then they sell the property for CASH so not easy to see the transaction and the cash sale is in HARD CURRENCY which they then hand carry back to thier countries. I know people that have done this. Dont blame turks for breaking rules. Brits do all the time

Red Tail

1/14/2013 6:44:02 PM

There is in general a great deal of uncertainty for a foreigner buying property in Turkey. Legal issue, technical issues and now also taxes. The property bought by foreigners create a lot of work opoprtunities for Turks, and a lot of business are set up around such areas to provide services. I am glad I am not depending on a business like that for my future survival.

mara mcglothin

1/14/2013 4:52:18 PM

JRC You are spot on ! The construction industry and the legal system in Turkey is never supportive of foreign buyers. Regardless of the new taxes, it is always risky business to buy anything from anybody in Turkey. All the laws were meant to be broken and are broken on a daily basis. Everyone is out to screw everyone else, and foreigners are easy marks because we have laws that protect people and their money in our home countries. Very sad really.

Brian Irlanda

1/14/2013 10:39:47 AM

The legal minefield for foreigners should really put them off buying property, even before this enormous tax. Turk, let's not forget that this tax also applies to Turkish people wishing to buy a home for their family. Dumping on foreigners buying Turkish property is backward looking when you think of the people who rely on what these people spend in the economy when they stay. I am sure the Turks living in Kuşadası, Didim, Bodrum etc would strongly disagree with you.


1/14/2013 9:59:40 AM

This is a silly move. It will hurt real estate developers and/or cause them to try to side step this tax, which will ultimately be detrimental to the sector and to the potential revenue the Govt is trying to achieve. After all, Turkey is trying to attract buyers to the market rather than give away the head start it already has due to the downturn in countries such as Spain. Its such an own goal!

Turk Uzan

1/14/2013 2:36:24 AM

We need sustainable growth and income which we aren't getting by selling summerhouses and beautiful properties to foreign "investors" ... buying some property is not really an investment the nation will benefit from, unless that property is used to built production plants etc. Sell foreigners land/property in the average prices of their own countries, unless they are planning to start a factory, etc. Ps. everyone is welcome, 112,300 in ONE year just seems like a "lot" to me,
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