Will Turkey become "the second Miami"? Foreigners continue to buy up local real estate

Housing prices in Turkey have sky-rocketed. As a result, international analysts are taking a closer look at the situation in the construction and development markets.

Recently, Turkey has become the leader in rental growth in Europe. The cost of the “Turkish square meter” in dollars frequently appears in global statistics. As it turns out, the cost of local elite residences is moving closer to the price of apartments in Miami.

But first things first…

Content:

• The cost of a "square meter" is $624 in Turkey. Is it cheaper in the USA? What about the UK?
• Tens of thousands of buyers have successfully obtained citizenship
• NOTE
• Will the new $400,000 “minimum for citizenship” be a hindrance to foreigners?
• The most sought after provinces among foreigners (including housing prices)
  • Real estate values in the top 10 provinces with the largest number of buying and selling transactions from foreigners
• Key conclusions

The cost of a "square meter" is $624 in Turkey. Is it cheaper in the USA? What about the UK?

At the time of writing, the increase in housing prices in dollar terms was 43% over four years in Turkey. One square meter has risen from $436 to $624.

Prices surged by the beginning of spring 2022. In Istanbul, the cost of a "square meter" has grown to $999 on average (perhaps even more at the time of the article’s publication). Moreover, according to İstanbul Gayrimenkul Değerleme (İGD), the Istanbul real estate appraisal company, the rate per square meter has increased to $1,600 in the central areas of the city. In luxury housing projects, including branded complexes, for example, in Umraniye, the rate rose to $3,000.

The comparison of Turkish prices with real estate prices in Miami in terms of numbers is clearly justified. Although the General Manager of TSKB Gayrimenkul Değerleme believes that it is illogical to compare the metropolis with the American “margins of the resort”: “Miami is not the first city in the United States in terms of importance. This is a summer area with predominantly low-rise buildings. On the other hand, Istanbul is almost the capital of Turkey, a financial center, a metropolis with plenty of working population. In this connection, it would be more accurate to compare Istanbul with New York.”

According to experts, it is not quite correct to compare prices per “square meter” in Miami to those in Umraniye, because in Umraniye it is about the so-called “branded” houses, “...because wherever you build a branded residence, its price will not be affordable.”

None the less, the expert admits that the real cost of a small apartment here will be about 2 million Turkish liras (TL), equivalent to $137,000 at current exchange rates.

Ahmet Buyukduman, one of the founders and managing partners of İstanbul Gayrimenkul Değerleme, also considered commenting on the sensational news about Istanbul/Miami. “Prices for branded residences in Umraniye are really high. Housing with an area of 200 m² will cost TL 7–8 million, or in the amount of $470,000 to $540,000. 100-meter apartments can amount to up to $300,000.”

In Miami, according to Zillow (the real estate website), whose newsworthy information became the reason for publication, the price of some residences is $430,000. Although many branded apartments are still more expensive. They cost about $650,000.

Therefore, the original comparison is hardly baseless. Market players are interested and compared Turkish prices with British prices.

Ismail Gürkan, the Director of the UK-based residential real estate agency in Istanbul, said that in Manchester, in one of the city's key business districts, a branded one-bedroom, one-living room apartment will cost £175,995. In Fikirtepe, the Istanbul district, you can purchase an excellent 3+1 residence, or two 1+1 apartments at once for the same amount of money and, according to the expert, receive a “guaranteed” rental payment of TL 47,000 a month. That would be £2,499 at the current rate.

Yes, rental prices are high in Istanbul. A rate of 50,000 TL per month is not uncommon. But for some reason, the expert does not mention how difficult it is to find people willing to rent even a high-class residence for this price. Even in the largest metropolis in Turkey, where there are many business people with good salaries. Recently, on the Turkish community’s social networks, subscribers were outraged by a post with a housing advertisement of a 1+1 apartment in Antalya (where rental accommodation has already quadrupled lately) was offered for $ 1,000 a month.

Even for real estate in a luxury complex located in a good neighborhood, this is a large amount, and local residents consider this rental rate exorbitant. The subscribers even threatened to file the first complaint to the tax offices to check whether the state received anything from these amounts, and the second complaint was to local authorities so that they would finally start to back off the homeowners who were raising rental prices day by day.

Tens of thousands of buyers have successfully obtained citizenship

The Dunya newspaper, with reference to the same expert, Ahmet Buyukduman, who evaluated the volume of home purchases by foreigners, writes… “In 4 years, 20,000 people obtained citizenship by buying a home in Turkey, from 2018 to 2021. This is about 5,000 people every year.”

The number of residential properties sold by property developers to foreigners amounted to 185,000 housing units during the same period of time.

Be reminded that the average amount for real estate purchased by foreign investors grew steadily and reached about $200,000 a few months ago. This is only 20% less than the “accelerated citizenship threshold”, which was equal to $250,000 at that time. According to the recent adjustment of the minimum amount, Turkish accelerated citizenship will now only be given for the purchase of a home worth $400,000 or more since the decree was enforced. Note, that the amount has already been approved at a governmental level

But even foreigners, who have much smaller amounts to invest, continue to take an active interest in buying Turkish real estate, due to political events and the influx of people prepared to spend here (within several months or several years, at least), the issuance of tourist residence permit cards, based on a property for a long-term rent, is limited.

In fact, the concern is not in additional limits, but in a sharp increase in the number of immigrants. According to the law, the number of holders of temporary residence permits in any region should not exceed 20%. There has been large growth in the number of newcomers here.

It is illegal to refuse to issue a residence permit of another type (by marriage, by TAPU) when proper documents are produced and there is an absence of violations by the applicant.

NOTE

By the end of 2021, the foreign population living in Turkey reached 1,792,036 people.

According to the statistics by TÜİK, first place went to Iran with 322,000 people. The second was Afghanistan (183,000 people), and the third was Iraq (128,000 people). Turkmenistan, Syria, Germany, Uzbekistan, Azerbaijan, Russia, and Kazakhstan were also in the top ten.

These statistics did not include foreigners with a residence permit for less than three months or other documents allowing a short-term stay, or Syrians who were in the country with temporary protection status.

According to this information, the foreign population in Turkey increased by 458,626 in comparison with 2020.

Most foreign citizens are concentrated in Istanbul. By the beginning of 2022, the population of the largest Turkish metropolis increased by 378,448 people and reached 15,840,900 people compared to the previous year.

In 2020, there were 450,854 foreign residents in Istanbul. In 2021, their number had grown to 740,954.

Ankara is in second place with 173,264 foreigners. Antalya takes third place with 136,946 foreign residents.

Bursa, Samsun, Mersin, Izmir, Yalova, Konya, and Sakarya are among the top ten provinces with the largest number of temporary or permanent residents with the citizenship of another country.

Some different information, however, is provided by the local immigration service (Göç İdaresi Başkanlığı). Perhaps because they could take into account other options for the duration of a residence permit.

The Immigration Service reports that since 2005, in Turkey, the number of foreigners with a residence permit has increased by 641% (there were 178,964 people in 2005). According to the Service, 53% of foreigners live in Istanbul. At the latest count, there were 703,804 people. Antalya is in second place with 126,310 people, and Ankara is in the third place with 100,929 people. Also, a large foreign population was indicated in Izmir, Bursa, Mersin, Yalova, and Samsun.

In order to receive a definitive guarantee of obtaining a residence permit, many foreigners prefer to buy a home in Turkey (at least for mortgage).

For the last five years, 1.4 million people have obtained a residency permit. There are only 3.9 million foreigners under so-called political protection. 3.6 million of them are Syrian refugees (see above) within the country’s borders. Every quarter of the year, nearly one million non-tourists arrive in Istanbul. "Labor migration" replenishes the workforce in Turkey.

All of the aforementioned factors raise housing prices by a large percentage. And it does not make it easier to obtain a tourist residency permit. One of the key ways for a foreigner to stay in Turkey for as long as he wants is to buy residential real estate, despite the final cost.

Will the new $400,000 “minimum for citizenship” be a hindrance to foreigners?

Görkem Ogyut, the founding partner and the CEO of Endeksa, reminded us that in 2018, as soon as the financial threshold for obtaining Turkish citizenship under the accelerated program was reduced fourfold (from $1 million to $250,000), the volume of transactions with foreigners sky-rocketed to 39,663 transactions a year, in comparison with 22,234 transactions in the previous year, 2017. In 2019, almost 45,000 transactions were carried out, and in 2021 there were 58,576 sales and a historical record was broken.

As of December 2021, the share of foreigners was 3.9% of the total number of buyers. But in the very first months of 2022, it has come close to 5%. Let us remind ourselves that in 2021, 1.492 million housing transactions were made across Turkey. The volume of sales to foreigners increased by 43.5% compared to the previous year.

Most foreigners buy housing in Istanbul, Antalya, and Ankara. In February, the share of transactions with foreigners in Istanbul amounted to 10% of their total number in the city.

The most sought after provinces among foreigners (including housing prices)

In the table you can find detailed property sales information from Turkey in March 2022. The analytical portal Endeksa.com, which analyzes real estate prices throughout Turkey, systematized everything.

Real estate values in the top 10 provinces with the largest number of buying and selling transactions from foreigners

Key conclusions:

• As you can see, in March, Antalya quickly shot ahead in the number of residential sales to non-residents. Almost every fourth home (23%) was purchased by foreigners here.
• Istanbul stayed at the same level as in February (9%), but lost 2% to Yalova (11% of total sales transactions were from foreigners). Trabzon is only 1% behind Istanbul (8%).
• Currently, the most expensive average house price is in Istanbul, Antalya, and Izmir. It is more than TL 1.2 million.
• The average cost of 1 m² does not fall below TL 5000 in all the top 10 provinces.
• The fastest return on investments is in Ankara, Antalya, and Istanbul. Trabzon is the slowest of the top 10 provinces so far.

Now let's take a look at the number of sales to foreigners and the dynamics in the transaction volume over the past 9 years:

• 2013 – 12,181 transactions;
• 2014 – 18,959 transactions;
• 2015 – 22,830 transactions;
• 2016 – 18,189 transactions;
• 2017 – 22,234 transactions;
• 2018 – 39,663 transactions;
• 2019 – 45,483 transactions;
• 2020 – 40,812 transactions (a slowdown due to the pandemic);
• 2021 – 58,576 transactions.

The difference was 63% for the period 2013–2017, and 163% for the period 2017–2021.

Based on the information provided above, it is easy to draw conclusions about the demand for apartments and houses in Turkey among foreign investors and to determine whether prices for residential real estate will rise in the future, considering an intensive increase in demand.