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Turkey Property Investment Tips Please also refer to Press Articles What's behind the Rise in Turkey Property Investments? Turkish Property Market has everything going for it. Recent reforms mean that Turkey is very likely to join the European Union by 2015. (This sounds a long time away, but the majority of gains in Turkish property prices should occur over the next 5 years). The only real question is whether the EU membership will go ahead as the EU commission, for the first ever time, have placed qualifications on this potential member-state’s invitation. Turkey is a very moderate Muslim
country with naturally welcoming and warm people. If you speak to
anyone who has been on holiday in Turkey, you will quickly draw
a picture of a nation with plenty to offer and a fine tourism
industry. Turkey is a lot more than a great place to buy a holiday home
in the sun. Here are some other reasons why Turkey
will be one of the 5 best performing markets over the next 10
years:
Whilst a well established tourist destination Turkey’s property market is still relatively undeveloped. However this is set to change as the Government intends to make Turkey a major economic power with tourism growth a key part of their strategy. Key Economic Factors
Land prices in Turkey have risen in recent
years and, in many cases, doubled. In 2005 to 2006, property prices
have risen by 25–40%. Recent research shows that by comparison
investments made since 1994 have yielded the following average
returns:
Taking an average of 25% capital growth, a property purchased
at GBP 60,000 with sustained growth over five years will have a
market value of GBP 183,105, entailing a huge 305% return on
investment.
Turkey is just entering the EU processTurkey is currently at the very start of the long road to
possible EU inclusion, meaning there are still another 5-10 years
before prices rise substantially. Prior to EU
membership, there are many factors yet to be discussed and many of
Turkey’s issues that need to be corrected before incorporation will
be seriously considered. However Turkey has some strong backers for
its entry and when it does get accepted into the EU, it is
reasonable to expect the price of property to rise greatly in line
with a huge surge in tourism.
Many investors are purchasing in Turkey with EU inclusion as a
major driving force, while looking to take advantage of the current
low property prices and growing rental market.
Turkey is at the brink of a property boomWith so many indicators, many of which are outlined on this
page, its clear to see that Turkey is at the beginning of a
"property boom". A boom period generally indicates a time when
demand for property outstrips supply. This is currently the
situation in Turkey especially in the major investment areas such as
Bodrum,
Istanbul
and Dalaman.
Turkish economy is very strong with 6% GDP growth in 2005The Turkish economy is currently very strong and undergoing
much growth. After an average growth of only 2.8 % for ten years
from 1993 to 2002, Turkey was able to achieve a growth rate of 5.9 %
in 2003 and a substantially higher rate in 2004. Turkey now has the
22nd largest economy in the world.
Excellent value front line properties with high capital growth potentialWhat is really attracting interest from international property
investors is the current value for money of properties in Turkey.
The Turkish market still offers excellent quality properties at
prices that most other locations of a similar calibre could not
offer 10 years ago. These prices, combined with the outstanding
expected growth and powered by strong market drivers, offer property
investors a unique opportunity.
Over 25 million tourists visit Turkey each year and boost the property marketA major indication of the current state of any property market
is the tourist trade. In Turkey the tourist market is expanding
massively as the country gains more exposure in the international
press. The possibility of it becoming an EU member country is
slowly beginning to take hold. Current demand for Turkey is
reflected in the 25 million tourists it attracts per annum.
This translates into solid rental yields by buy-to-let investors who
purchase in the best tourist locations.
Golf tourism evolving in Antalya, making golf investments more valuableGolf has been a strong market driver in many successful
property markets around the world for many years. Spain has used
golf to generate a very strong secondary season with thousands of
golfers flocking to its shores to play golf during a time when they
can’t play their sport at home. With golf being so popular around
the world many developments are now being constructed around or near
golfing facilities. Turkey and namely Antalya is no different.
See Golf Property in Turkey.
Turkey offers a modern infrastructureMany emerging markets have limited infrastructure and this is
always a problem that can stunt development. However Turkey has a
solid and modern infrastructure that is rapidly growing in line with
its economy, tourism and property markets.
Turkey is considered to be a highly dynamic country by the World Trade OrganisationTurkey is a dynamic and emerging country equipped with a
network of well-developed infrastructure and a globally competitive
work force. Its unique position at the crossroads of the world trade
routes and its proximity to the developing energy producing areas in
the Caspian and Central Asia are factors that further raise its
economic potential for the coming years.
Turkey is also home to a thriving tourist industry and a fast
growing property market, attracting huge international interest.
Property prices are on the increaseLand prices in Turkey are said to have doubled over the last 2
years.
“A property that cost £35,000 in 2004 but starts from about
£60,000 shows that prices have increased by as much as 30% in some
areas but the build quality is of a high standard and, relatively
speaking, property in Turkey remains a bargain.” (The Times Online
February 2005).
No capital gains taxTurkey also offers some tax incentives that are of high
interest to property investors, such as its regulations regarding
capital gains tax. If you sell your property after four years, there
is no capital gains tax. Property that is sold before the period is
over will be charged at the standard rate of income tax (between 15%
and 35%), calculated on the difference between the buying and
selling price.
General economic overviewThe Turkish economy is composed of a mix of industry and
commerce. Along with a traditional agriculture sector that still
accounts for more than 35% of employment, it has a strong and
rapidly growing private sector. However, the State still plays
a major role in basic industry, banking, transport, and
communication.
The largest industrial sector is textiles and clothing, which
accounts for one-third of industrial employment; it faces stiff
competition in international markets with the end of the global
quota system.
However, other sectors, notably the automotive and electronics
industries, are rising in importance within Turkey's export mix. In
2004 GDP growth reached 9%. Inflation fell to 7.7% in 2005 - a
30-year low.
Turkey offers a very competitive cost of living. This is another driving factor for tourists and those looking to re-locate. Money still goes much further in the warmer Turkish environment. A beer will cost you about €0.60 and a meal in a restaurant
starts at about €8.00. (2005 Turkish Embassy information).
Summary of economic factors that make Turkey a worthwhile investment
Key Natural Factors The varied landscape of Turkey offers investors a wide choice
of areas in which to put their money. Turkey is a present-day marvel
while remnants of early civilisations vie with a modern,
westward-looking republic. Beautiful beaches and a diversity of activities make it a popular and well-tested holiday destination Turkey is known for its unique and very diverse natural
features. Turquoise water laps the beaches of the Mediterranean and
Aegean coasts as they bask in the hot summer sunshine. While the
Black Sea coast is far less explored but wetter and richer in
vegetation, at the moment this area is largely devoted to
agriculture and is rarely explored by tourists. Although Turkey is expanding to keep up with the current level
of tourist growth, it has a very solid infrastructure that has kept
its tourists happy for many years, making it well versed in what is
required from a successful holiday destination: Golfing at the moment is limited to the area around Antalya, but as the industry succeeds and profits are made, it is certain to expand to other areas. The area around Belek is famous for bird watching and
enthusiasts from all over the globe go to indulge their hobby
there. Yachting is another thriving tourist industry – the many small
ports and islands make it an ideal destination for boats. Sight-seeing To know Turkey would take you a lifetime. This is country is so
rich in places to go and things for tourists to see – from the hot
springs at Pammukele (known as cotton castle) to the magnificent
mosques of Istanbul, there is something for everyone. Turkish summers are much longer than many other EU destinations Turkey enjoys a variety of climates, ranging from the temperate
climate of the Black Sea region, to the continental climate of the
interior, then, to the Mediterranean climate of the Aegean and
Mediterranean coastal regions. The coastline touching the four seas
that border the country is 8333 km in length. Good climatic factors The climate in Turkey is second to none and this is the reason
behind the success of its tourism industry. The summer is warm and
very reliable, bringing sun worshippers from all over the world to
its beautiful coastlines. Temperatures range from around 21°C in
April to a very hot 31°C in the mid-summer months of July and
August. It is not only the outstanding weather that gives Turkey an
edge over its competitors but also the sheer number of hours of
sunshine it enjoys each day. In general Turkey benefits from 8 hours
of sunshine in the low season (April) to a huge 12 hours in high
season. Many visitors to Turkey can find it too hot in July and August
and prefer to visit in either June or September when the
temperatures are still in the 80´s while continuing to enjoy around
12 hours of daily sunshine. The large population means that Turkey has a strong internal property market While Turkey is enjoying increasing amounts of international
investment, property buyers are deciding to buy Turkish property
because it has a huge advantage over these other emerging markets:
With a large population of over 70 million and as the Turkish
economy continues to grow, Turkish people are more in a position to
purchase property, especially with the new mortgage rules allowing
Turks to use finance for property purchases. With the Turkish
population continuing to grow at the rate of 2% per annum, 70% of
this population is under 30 years of age. New finance laws and
possible inclusion into the EU mean the average Turkish citizen will
be generally wealthier. The future looks bright for the domestic
property market in Turkey and therefore it is equally promising for
overseas investors owning property in prime locations. Turkey Property Investment Strategies The "Buy to Let" Market in TurkeyTurkey 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 an 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 accomodation for the tourist service industry, who are 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. Buy to Let (Case Study)Adam
decides to purchase an investment property and he decides that
the "Buy-to-Let" investment strategy is for him. Adam has savings of around £55,000. After careful consideration, we recommended that Adam
purchases a 3 bedroom detached villa in Bodrum Yalikavak priced
at £172,000. Initially Adam paid £2,000 reservation fee to hold
the property. Next
Adam paid a 30% deposit of £51,000 (after his £2,000
reservation fee already paid) We assisted Adam with release of equity from UK
property for the remaining £119,000 at a rate of 5.0%
(current UK rates) over 20 years, this translates to a monthly total
mortgage repayment of £785 (capital + interest) which is equal to
£9,420 over 12 months. Adam starts to rent his new property immediately and
during the 4 months "High Season" he receives £2,000 per month in
rental income. In Autumn and Spring, he receives 3 full months
again. The rental payments on his Turkish property amount to
£14,000. Adam spends c£100 per month in management fees
amounting to £1,200 annually. This leaves a net rental income
of £12,800 annually. This covers his total mortgage repayments
and leaves a positive income of £3,380 per annum.
Adam's property in Turkey was purchased in December 2005. In January 2007, the market value of the property had risen to £211,000. This is an unrealised capital appreciation of £39,000 in 12 months. In short, Adam managed to increase the value of his investment by £39,000 and earn net rental income of nearly £3,400 in 2006. Short-Term letting v Long-Term Letting.The
final decision to be made by the "Buy to Let" Investor is which
letting strategy to use. Its 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 (those in
holiday resorts such as Bodrum, Fethiye
etc, as classified Perfect Holiday Home in Turkey) and others
to long term locals as a permanent homes such as our properties
classified as Retirement Property in Turkey. Our experts will help
you decide what's best and choose the property and rental strategy
that's best for you. The
"Buy to Let" Strategy is not ideal for EVERY investor and it is
essential that property for this strategy is chosen wisely as it
needs to be a rentable property in a popular location to allow the
investor to maximize income from the Investment. The
other benefit from this type of Investment is that during the time
this property is being rented and earning the Investor an income and
holiday home it is still appreciating in value at one of the fastest
rates available. All in all the "Buy to Let" Investment model is a
sound investment decision and Turkey is currently an ideal location
to deploy this strategy. Capital Appreciation Strategy The real gains in Property Turkey is derived in terms of capital appreciation. Case Study - Off Plan Purchase and Resale We guided a UK based investment fund to an off-plan development in Bodrum Gumusluk. The fund reserved 3 ground floor apartments and 2 penthouses in the same block within a seafront development in October 2005. At the time the units were reserved, the developer had an off-plan promotion in place which lasted 2 months. Total purchase price amounted to £325,000. The payment terms negotiated with developer allowed 25% upfront and the remainder after block completion. The upfront amount paid was £81,250. We ensured that the investment fund reserved their units within the latest completion stage of the development containing 145 units in total. We knew that this particular development would prove very popular amongst second home buyers and would sell out pretty quickly. In November 2006, all 5 units were sold by the investment fund to clients referred by us. The sales value amounted to £409,000. The completion date of the development is April 2007, meaning the new buyers will pay the total purchase value latest within 1 month of completion. The investment fund's total profit on sale amounted to £84,000 (£409k - £325k). Considering that initial capital outlay was only £81,250, the fund's return on investment is 100% in 18 months. The above strategy works perfectly well in emerging property markets such as Turkey. Our property category Investment Property in Turkey includes those developments that are ideal for capital appreciation.
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