Why Investing in Turkish Real Estate is Lucrative: A Comprehensive Guide

Turkey is a cross-continental country that connects Asia and Europe. Ankara is the capital, and Istanbul is the biggest city. Turkey is an attractive destination for investors who wish to take advantage of a rapidly rising real estate market, with a population of around 80 million as of 2017, and a large proportion of that population being young and upwardly mobile. The Turkish real estate market has exploded in the previous two decades. While there has been a general decrease in the real estate market in Europe, the Americas, and many other regions of the world, according to Knight Frank data from 2017, Turkey placed sixth in the world in terms of its annual price growth index, ahead of Australia and India, with a year-on-year gain of more than 11%.

PWC and Deloitte Consulting have declared Istanbul to be Europe’s most desirable city for real estate investment. Turkey is the world’s third most profitable country for real estate investment. The prospect of Turkey’s EU membership has fueled the growth and appetite for international real estate investment. This has hastened the buying of properties in Turkey by vacation homeowners and investors from all over the world.

More importantly, the legislative modifications to many laws including the right to the registration of property titles, mortgage laws, residency laws, and the redesign of tax rules, all of which directly influence how foreign investors can purchase and develop property in Turkey. The Turkish real estate market has become more competitive as a result of these modifications.

Stable economy and population dynamic

Dynamic demographics and solid economic data have made it easier for international investors interested in businesses and the purchase of real estate to choose Turkey progressively. In recent years, more global firms and foreigners have demanded commercial and residential property, and more are demanding houses and offices. Investor trust in the real estate market has improved dramatically with a stable economy. Turkey has internationalized and institutionalized the industry, while in preparation for EU accession it has also implemented transparency and high-quality requirements in real estate transactions.

Turkey has become a prominent target for foreign direct investment with a GDP of 851 billion USD in 2017 and 60% under the age of 40.

The mortgages also have surged with banks and mortgage businesses paying more than 100 billion in 2018. In 2018, Turkey also welcomed approximately 46 million people, making Turkey the sixth most popular tourist destination in the world. The increasing number of tourists shows the strong potential of Turkey to buy and rent holiday homes. This is because all these tourists need to stay in hotels or residences.

Turkey is a regional economic hub for ultra-modern shopping centers and easy access for more than 1.5 billion people in the country who come to trade or other services. This has raised the demand for the country’s infrastructure.

SWOT Analysis for Turkish Real Estate:

• STRENGTHS:

  • Turkey’s GDP projected growth is Europe’s leading investment country.
  • Strong regulations on finance and banking.
  • Globally recognized construction business.
  • Mortgage facilities access.
  • Adding further purchasing incentives every year by the government.
  • Strong domestic housing demand.

• WEAKNESSES:

  • Land acquisition is tough and building permissions are not easy.
  • A large number of historic dwelling types are not entitled to financing facilities.

• OPPORTUNITIES:

  • High domestic demand for residential and commercial space.
  • Urban refurbishment initiatives in major cities create additional housing options.
  • The demand for excellent construction has intensified with the Earthquake and Natural Disaster Regulations.
  • Increased inflows of visitors and investors have taken advantage of office spaces and residential buildings.

• THREATS:

  • In some places of Turkey, earthquakes are more prevalent and hence investors may get afraid.
  • Compared to established real estate markets like the UK and the US, the industry is still turbulent.
  • The economy is under strain from a depreciated currency.

The economic outlook of Turkey:

Turkey has shown tremendous growth in its GDP since the last decade. Between 2002 and 2016, it has shown a GDP growth of about 4% on average (see graph)

The per capita income climbed from a meagre 3,500 USD in 2002 to 27,500 USD in 2017. This demonstrates that the country is ascending, as its citizens increase their wealth.

Turkey was also slowed down by the worldwide credit crisis which damaged the world’s markets and economies in 2009 as foreign investment and earnings declined. However, it did not hold back the country long and in the years 2010 and 2011 respectively, the Turkish economy attained a growth rate of 9.2% and 8.5%. Due in part to a devaluation of the currency, growth has slowed in the previous few years. Economic growth in 2017 was 7.4%, while economic growth in 2018 was 2.6%.

One of the aspects which have made the Turkish economy steady is that the nation joins other European countries at the EU round table by establishing good financial and structural policies. This improves efficiency, transparency, and compliance with high practice standards. Turkish central banks also played an important role in stabilizing inflation and creating macroeconomic balance sheets in strong monetary policies.

Furthermore, the Turkish Government is strictly disciplined with a budget deficit reduction from a high 17% in 2001 to 1.8% in 2019. The Turkish Government’s foreign trade was also an important economic growth tool. Import restrictions were increased during the liberalization of foreign exchange operations. In 2018, Turkish exports increased enormously to 168 billion dollars, a remarkable climb from 36 billion dollars in 2002.

OECD 2012 – 2017 Economic growth forecast

To boost the Turkish economy, foreign direct investments also played a major role. The Turkish economy has been driven to wherever it is by demographic considerations such as youthful populations, skilled workers, and fiscal incentives. By 2018, the foreign direct investment amounted to USD 168 billion; which is a significant sign of Turkish investor trust.

Tourism was also a major source of foreign income. There is a large number of tourists in Turkey, which attracts one of the world’s biggest number of visitors every year; due to its natural beauty, unique historical monuments and friendly hospitality. 46 million visitors visited the nation in 2018, which led to earning more than 30 billion USD in foreign revenue.

To improve the economic transition in Turkey, privatizations and Turkish businesses have played a major role overseas as well.

Legal and political structure:

Turkey is a republic established on the laws of equality, democracy, and pluralism. It was founded in 1923 and originally adopted in 1924. The country was under a parliamentary system until 2018, however, the politics of the country are now conducted inside a presidential system following a democratic process. The presidential system gives the President of Turkey the authority to make executive decrees, and to choose judges and heads of state institutions. He is the head of the government and the Head of State.

The political system of Turkey is founded on the separation of power. While the executive power of the Council of Ministers is executed, legislation is assigned to the Turkish Grand National House. These institutions are independent of the courts.

Why would you Invest in Real Estate in Turkey?

Booming economy: More than $850 billion in GDP in 2017, yearly GDP growth estimates above 5%, the world’s 20th biggest export economy of $168 billion makes Turkey the best place for investment in the property industry.

Young and dynamic population: Turkey has around 80 million citizens, and over 60% of the population is under 40 years old. The younger generation is ideally situated to establish businesses and promote Turkish economic progress. Moreover, changing nation norms and traditions imply that younger people go from parental homes to their own houses earlier. Which creates domestic housing demand, and increases the requirement for high-quality housing and accommodation. In Turkey, a shortage of roughly 2,5 million properties has been estimated by the Central Association of Turkish Real Estate.

Low incentives and taxes: In certain areas, Turkey gives incentives while reducing corporation tax from 33% to 20%.

Large domestic market: The expanding number of well-educated, wealthy professionals is making Turkey a very large local market. In 2018, tourist arrivals increased to 46 million. This gives real estate developers an attractive investment opportunity.

Good infrastructure: Well-established air, land, and sea transport, modern energy, and highly developed transport and communication technology infrastructures make Turkey well ahead of other rising economies as a safe and profitable environment for investment.

Citizenship by investment in Turkey:

The government claimed in 2018 that its investment was decreasing the requirement for Turkish citizenship. Now, purchasers may get Turkish citizenship by buying Turkish properties for $250,000, making the project one of the cheapest in the world. See our blog post: Turkish citizenship through real estate investment guide, for more thorough details.

Benchmarking Turkey to France, UK, Russia, Greece, and the US:

If you compare Turkey with other developed and rising countries, you can analyze it in depth because it is the perfect location for investment for real estate developers and individual purchasers to buy overseas properties. The United Kingdom, United States, France, Russia, and Greece are among those that compete for investment possibilities with Turkey.

Turkey has one of the toughest financial rules in the financing and banking sectors, with Greece the least. In Finance and Banking Regulations and Skilled Workforce, it ranks ahead of France, Russia and only slightly below Britain. This gives more trust to investors and promotes direct foreign investment. It is more-easier and safer for Turkey to put no limits on financial flows into and from Turkey. Turkey also has the greatest banking and financial capabilities in the BRICS (Brazil, Russia, India, China, and South Africa). Most people are young, well-educated, and have great technical abilities in several fields.

In comparison with the United States, Russia, France, and Greece, Turkey is also a global leader in flexibility and adaptability. It opened its doors to investment by other countries, enabling them to obtain more foreign capital and direct investment. Globalization attitudes are more feasible than benchmark countries, as is international trade.

In Turkey, the process of opening a business and registering a real estate title is incredibly easy (see graph below). It was made simpler to form a corporation or begin a business by the New Turkish Commercial Code (New TCC). The New TCC Code 6102 offers an internationally accepted business strategy. You can now register an equity business or limited liability corporation with only one stakeholder. In addition, the new TCC reduces the necessity for foreigners before registering their businesses to secure minority shareholders. You may also register your company on a single day and you may apply all paperwork to the registrar’s office as a legal entity.

Investing in Turkey real estate stands to be more lucrative than in the US, France, Greece, Russia, and other EU countries. The Republic of Turkey has made all efforts to make it as simple as possible for real estate investors to participate and support the growth of the country. You are more likely to generate a higher return on investment in Turkey, than any other country in the EU and most other countries globally.

Real estate investment in Turkey is more lucrative than it was in the United States, France, Greece, Russia, and other EU countries. The Turkish Republic has made every effort to make participating in and supporting the progress of the country possible for real estate investors. In Turkey, you are more likely than any other EU country and most countries throughout the world to make a return on investment.

 

In Conclusion, Turkey’s strategic location, young population, and robust economic growth make it a promising destination for Turkish real estate investment. The nation has undertaken numerous reforms to attract foreign investors and offers a competitive edge over many established markets. With its potential returns and strategic advantages, Turkey’s real estate market beckons investors from around the world.

Considering a property investment in Turkey? Reach out to our experts today for personalized guidance!