Property in Istanbul: A foothold in Asia

  Date posted: 28th of April 2010

Historic Istanbul, straddling two continents, is attracting new fans, says Zoe Dare Hall:

Istanbul, for centuries the capital of the Ottoman Empire, and still Turkey's cultural heart and melting pot, can be daunting. It spreads more than 60 miles from east to west and is home to 14 million people. But such is its allure, with its character and history, landmarks such as the Blue Mosque and the Grand Bazaar's souks, and the unique distinction of being a city that straddles two continents divided by the Bosphorus, that some British second-home hunters are happy to battle through the complexity of buying a property in the city.

There is still a lack of English-speaking estate agents. But there was a lack of any established estate agents when Elisabeth Kendall, 38, a research fellow at Oxford University, bought her apartment in the historic neighbourhood of Galata 10 years ago, when she was working in Istanbul for six months and realised it would be cheaper to buy than rent.

'I found my place a two-bedroom, 105sq m apartment, for GBP16,000 through a kebab seller who set up a property business. Being in the historical centre, I knew it would go up; it's now worth about GBP130,000,' says Kendall, who says the area, back then, had mud streets and no lighting.

'Now Galata is very chichi with lots of boutiques and cafes, proper taxi ranks and a metro stop. Lots of foreigners have bought properties there, including a few Brits, and I love going out there every six weeks,' Kendall says. Two years after buying her own property, she bought a whole building nearby for a friend, for GBP65,000 and spent GBP130,000 renovating it into a large triplex with a roof terrace 'for great parties'. It is now worth about GBP650,000.

'It was a huge task renovating it as there aren't a lot of companies around to help you, and I was doing it on the cheap,' she says. 'But I've now got my eye on another building for around GBP330,000, as I fancy a rooftop flat. And it's unusual to find good properties for sale in the historical centre.'

It is also now difficult for foreigners to buy properties in the Beyoglu district a protected heritage site that includes Galata as it has hit its quota of non-nationals who can own property there (10 per cent of property owners). The way around this is to buy from another non-national, as Kendall is doing, or set up a Turkish limited company, a process that costs about GBP1,000 and incurs similar annual fees. Or you could buy through one of the small boutique developers emerging in the old town, such as the Ipera Group, which specialises in restoring historic buildings in Galata.

Ipera has two two-bedroom penthouses for sale in a restored Ottoman town house near the Galata tower, with Bosphorus and city views, for GBP950,000, and one-bedroom apartments in the same building, to be fully renovated by late this year, from GBP250,000. If you buy in a listed building such as this, you are also exempt from paying stamp duty (usually 1.65 per cent of the property's sale price) or property tax (0.2 per cent).

Sandor Hatvany, who lives in north London, bought two of Ipera's one-bedroom apartments off-plan in 2007 for GBP228,000 and GBP400,000 now, he anticipates they are worth about 18-20 per cent more. He currently reaps six per cent rental yields.

'I'd love to live in Galata one day,' he says. 'It's a stunning neighbourhood with a cultural, bohemian feel, old trams in the street and upmarket cafes, and it's near to Taksim Square, the heart of the city centre.'

For those who like to dip into, but also to be able to escape the intoxicating exoticism of the old town, the Princes Islands where the sultan's sons had summer homes in the 18th century and wealthy Istanbulites have followed ever since offer a peaceful retreat.

Burgazada, the smallest of the 14 islands, is 20 minutes by fast ferry from central Istanbul and car-free, as transportation is still by horse-drawn carriage. There, Trevor Barratt, a 59-year-old company director from Exeter, bought his three-bedroom apartment a year ago for GBP416,000, which he visits regularly and rents out through Holiday Lettings for up to GBP1,350 a week.

'The island feels incredibly safe,' Barratt says. 'Police greet every ferry from the mainland and there's a real sense of community, with the half of the island facing Istanbul's Asian side becoming one big market at weekends.'

The bureaucracy behind buying his house was 'mind-blowing', however. 'There is a huge amount of paperwork, as you pay separate taxes to every local public service. Beware of bribery when dealing with officials, as it's seen as the accepted way to speed things up and find a good lawyer,' he advises.

Estate agent Cameron Deggin, from the UK-based Turkish specialist Place Overseas, urges buyers to be careful of what they buy. 'There is a lot of money to be made from buying in Istanbul, but you have to go to prime areas: the city centre, the Bosphorus or close to the financial districts, such as Taksim. No more can be built in these areas and it's where people with money want to live,' he says.

Properties, Deggin has for sale include a renovated three-bedroom apartment in the Ortakoy district, near the Bosphorus, for GBP175,000 and a two-bedroom apartment in Cihangir, five minutes' walk from Taksim Square, for GBP145,000.

Place Overseas: + 44 (0) 20 8371 0059