The record-reaching historic high growth of the euro and dollar in comparison with the Turkish lira, as well as the luxury residential projects built after the outbreak of the pandemic caused an explosive demand for housing from foreigners, as we have recently told. In 2021, analysts hope that a sales record of residential real estate to investors from abroad will happen – is there a possibility to match even surpass the «threshold» of 50,000 transactions per year?
Content:
- Why is foreign interest growing?
- What are people buying? Who’s buying real estate?
- «Make your bets, gentlemen!»
- A passport in exchange for a house? No, it comes with the house!
Why is foreign interest growing?
The number of foreigners who want to get a house or apartment in Turkey is growing daily. Because pandemic restrictions are being lifted, life is going back to «normal» as announced by the authorities in June, and the influx of tourists is growing. And a rather large percentage of those who arrived appreciated the benefits of living by the sea and have become potential investors.
The interest of foreign investors in Turkey remains despite the pandemic. This year, a 2-year record in sales of residential real estate to non-residents has already been recorded.
The number of housing units sold to foreigners in the first 6 months of the year increased by 44% compared to January-June 2020 even though total sales dropped by 11.5%. In the first 6 months, citizens from other countries concluded 20,488 residential real estate transactions in Turkey and by the end of the summer, there were more than 25,000 transactions. In June alone, a record increase was recorded at +185.3% compared to June last year (more than 4,700 transactions). July is not much «behind», also exceeding the July 2020 figure by 64%. The 3 countries whose citizens bought the most housing in Turkey were Iraq, Iran and Europe. Also, these 3 countries are in the lead according to the results of almost every single month.
And over the past 8 years, the number of homes sold to foreigners has exceeded 220,000. The highest figure so far was recorded in 2019 at 45,483 transactions. But this year, there are hopes for a new record – taking into account the announced: «minimum threshold» of 50,000 transactions.
So, what’s the reason for this increased interest in buying a house in Turkey?
Experts say that the most important factor is the lira’s depreciation which we’ve already mentioned. Over the past 5 years in Turkey, the dollar has «grown» from 3.5 to 8.5 and recent data shows that it’s up to 9 Turkish lira (TL). The euro exchange rate has also increased from 4 TL over the same period to over 10 TL today. This depreciation of the local currency has made luxury homes in both popular areas of megacities and tourist areas on the coast quite affordable and «easily accessible» for foreign investors.
After all, a few years ago, 1,000,000 euro was half of its current value in TL. So, for the price of 1 apartment earlier, you can buy 2 today or even get a decent house instead of an apartment.
What are people buying? Who’s buying real estate?
As for the «spread» by countries and cities, we have already mentioned the TOP-3 among buyers: Iraq, Iran and Turkey. Germany and Afghanistan are not far behind and the Emirates is «gaining» in purchase volume. In the TOP-20 countries in terms of buyers, the States (USA) has «moved» to eighth place.
The president of the Istanbul Builders Association Nazmi Durbakayim explained that he plans to rely on Qatar as an intermediary through which it’s convenient to sell housing to the Persian Gulf countries.
Also, developers, not without the help of the Association for the Promotion of Turkish Real Estate Abroad, use Spain, France and Portugal as examples in their work and adopt their methods of selling housing to foreign investors. «Although the share of residential real estate sold to foreigners in total is only 3.8%, the amount received from foreigners in the local currency is still higher than what we earn from local buyers», Nazmi Durbakayim stressed. This is true even though the buyers are the winners as housing in Turkey is cheaper than a similar European one, if you don’t consider some prestigious areas like Bodrum.
The goal has already been announced to «raise» the percentage of apartments and houses sold to foreigners from 3.8% of the total (the current figure in Turkey) to 10% (recorded, for example, in Spain). This is because Turkey is in some ways better than Spain in terms of the climate and comfort of its proposed housing.
Istanbul turned out to be the most preferred city for buying residential real estate. It’s followed by the «resort capital» Antalya, as well as the «official» capital Ankara. Izmir, the «home» of the future first Turkish nuclear power plant Mersin and Bursa are also popular.
Istanbul developers emphasize that foreigners have received new and modern residential complexes, as well as housing projects in large areas of Istanbul like Esenler and Beylikduzu (European side) with great interest.
Many are interested in modern, ultra-technological and environmentally advanced elite complexes that are basically entire neighborhoods. These are «mini-cities» with their own infrastructure, gardens, parks or «healthy» housing with maximum access to oxygen.
Well, the pandemic certainly had a positive impact on changing priorities in homebuying. It changed preferences in the sense that buyers are now practically not wanting small cars. People who want to buy 1 +1 (one-bedroom) or 1+0 (studios, which are already gradually «dying out» in Turkey) are fewer. People need spacious properties with many rooms, balconies and terraces.
«Make your bets, gentlemen!»
Since housing for foreigners (taking into account the exchange rate) has fallen in price in general, realtors are determined to push foreign investors to consider luxury housing.
Turk Estate has already said that Turkish developers expect sales revenue of more than $1,000,000. And these are not empty hopes but quite realistic forecasts keeping in mind that a sufficient number of wealthy interested parties have already appeared, including from Singapore, Hong Kong, China and Azerbaijan.
So now realtors are betting on increasing «standard checks,» The cost of Turkish real estate sold to residents of other states already reaches an average of $150,000. But, there are plans to bet on more expensive housing worth $1,000,000 and above because the «average check» for a foreign buyer by 2025 will be at least $225,000. And the total income from these investors is planned to increase to $20 billion annually.
This is more than true as more than 83% of foreign buyers are satisfied with their chosen housing in the Republic of Turkey. Many of them are voicing plans to buy more new apartments.
Inflation plays into the hands of Turkish developers and prices are rising rapidly. Real estate in popular areas and cities is steadily «growing» in value from 30% to 70% and in 2021 housing in Turkey may double in price. In the popular Bodrum and Cesme, the average cost of residential real estate has already exceeded 2,000,000 units.
It’ll be more convenient for foreign buyers to make transactions as buyers feel more protected because of additional checks of buildings for earthquake resistance, assigned «passports» where the information can easily be checked on the Internet, as well as increasing realtors’ qualification requirements for others working with foreign investment managers. These requirements are becoming tougher. Now, in addition to the relevant certificates, both firms and employees themselves need to know English, European or Persian.
It's also more profitable to buy luxury real estate now. It’s become noticeably cheaper, taking into account the exchange rate and it’s also easier to rent out for the short and long-term. In Mugla, in particular, Bodrum, renting out a decent villa for a season could earn you one or two simpler apartments in smaller cities in just a few months!
Citizens of other countries continue to move to Turkey for months or even years even if they don’t plan to buy something there and «naturalize» themselves. They all need a cozy property, ideally a detached house with a good view in a popular area or a spacious apartment like a duplex in a prestigious modern residential complex within walking distance from the sea. And this is just in the luxury segment.
A passport in exchange for a house? No, it comes with the house!
Well, let's not forget about getting citizenship by TAP (right of ownership of housing) as well as «instant citizenship.» Although this isn’t the main reason to invest in Turkish real estate, it’s still significant.
Especially since the financial «qualification» decreased from $0.5 to $250,000 (this happened in 2018 and led to a rapid increase in the number of foreigners buying homes in Turkey).
Also, for some time after this rule, buyers didn’t know that you could buy several (for example, 3-4 apartments) homes for the specified amount. So, you could divide the amount and choose one house to live in while renting out the rest. This means you could start getting a return on your investments almost from the first days of owning real estate. Also, one of the conditions for getting «instant citizenship» with investments of $250,000 or more is that you can’t sell your property in the first years after buying it.
President of the Association for the Promotion of Real Estate Abroad (GIGDER) Omer Farooq Akbal stressed, «We expect new records, especially in October». According to him, in the coming years, the demand for housing from foreigners will continue to grow rapidly because even in the most difficult pandemic year, sales of houses to foreigners decreased by only 10%. «We expect to increase the share of European and US citizens among buyers to 25%. Also, I think that the share of investors from Central and Far Asia, which currently stands at about 13%, will gradually increase».
Faruk Akbal once again said how important it is to conduct business well with potential buyers from abroad. As he firmly said, marketing structures, agencies and developers who sell real estate to foreigners must get a license. The Association has already sent a request for this to the relevant ministries. He said that now there are about 5000 real estate agents in Turkey working with potential buyers from abroad and they don’t always have sufficient training for this. So, «unfair competition» often arises when the percentage for services is the same but the quality of services is completely different. «Moreover, it can put investors in a difficult situation after transactions are concluded by non-institutional companies. That's why we need licensing. If this regulation can be achieved, then even purchase fees, which have increased significantly recently, will also decrease».
Omer Faruk Akbal also mentioned the most common complaints from buyers-residents of other states. Most often people are dissatisfied with the lack of «transparency» of payments and language difficulties. You don’t just have to understand the nuances of the legislation of a foreign country when buying but there’s also no common language of communication. Not all Turkish realtors speak at least English fluently. You either must overpay a translator or risk the correctness of the transaction or paperwork. «The work doesn’t end with the housing sale», emphasizes Omer Faruk Akbal. «It’s equally important to retain the interest of a foreigner, understanding how to give them the benefits of long-term residence in the country in a profitable way – and perhaps encourage them to repurchase. This also requires rules about how to do it properly».
Living in Turkey is more convenient for foreigners than in several other countries. There’s a wonderful climateand , developed infrastructure, and children immediately enter free kindergartens and schools. There are many more are being built in cities popular with foreign investors, including with the expectation of an influx of immigrants.
