Turkey Off Plan Property Investment and Opportunities

8/14/2019 Turkey Off Plan Property Investment and Opportunities

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27th November 2006

Demand outstrips supply by500,000 units per year

Mortgages shortly available

TURKEYNo foreign property

ownership restrictions

One of the strongestEuropean property

markets 2007


2/12Turkey 2 Ready2invest

Turkey

TURKEY AT A GLANCEArea: 780,580 km2

Climate: TemperateTime zone: GMT/UTC + 2Population: Over 70 millionLanguage: Turkish (ofcial)Capital city: AnkaraPolitical system: Republican parliamentary

democracyCurrency: New Turkish Lira (YTL)International airports: 7 (including Istanbul)Date of EU accession: Expected in 2015

Getting There

European airlines y directly yearround into Turkey. Cheap ightoperators EasyJet now run a dailyight to Istanbul from the UK, withprices starting from just 30.

Approximate ight times to Istanbul:

from London 31/2 hrsfrom Dubai 2 hrsfrom Moscow 31/2 hrs

Black Sea

Mediterranean

Bulgaria

Syria Iraq

Armenia

Georgia

Greece

Cyprus

I s t a

n b u l

Ankara

Property prices 40-50% less than in Eastern Europe

B o d

r u m

M a

r m a r i s

A n t a l

y a

F i n i k e



STRONG ECONOMIC GROWTHTurkey is the 16th largest economy in the world with an

expected GDP of $382 billion, which will put the Turkisheconomy ahead of Belgium, Switzerland and Sweden in 2006.Bear in mind that 45% of the Turkish economy is unrecordedtoo, meaning it is actually much larger than publicly stated.Turkey is also among the top 7 emerging markets, with oneof the most open, dynamic and internationally integratedeconomies in the region. Indeed, some large clients of PriceWaterhouseCoopers regard Turkey as a faster-growingmarket than China, India and the rest of the so-calledE7 countries. As economic growth translates into increasedspending power, there will be a strong upward pressure onproperty prices.

ECONOMIC AND POLITICAL STABILITYe economic transformation in Turkey has been dramatic,

especially the lowering of ination, and the country is nowmore stable economically and politically than ever before.Turkey has been a member of United Nations since 1945 anda member of NATO since 1952. It has also been a secularstate since 1923 where religion and the state is separate.

SERIOUS HOUSING SHORTAGE A rapidly growing, young population coupled with swifturbanisation has led to a severe housing shortage in Turkey.

According to a recent study, the country needs more than 5million new houses by 2010. Furthermore, inefficient nancialinstitutions have historically hindered developers ability tosecure nancing, compounding the housing decit.

SET TO JOIN THE EU OR CLOSELY CONVERGE BY 2015Turkey has always had very close ties with the EU. In 1996,a Customs Union came into effect between Turkey and the

EU, creating the closest economic and political relationshipbetween the EU and any non-member country. Last year,Turkey met all of the Copenhagen Criteria, the politicalcriteria which are the pre-requisites for starting the full EUmembership negotiations, and this has already begun toimpact property prices.

INTRODUCTION OF A MORTGAGE SYSTEMDraft mortgage law will be ratied in 2006, stimulatingdemand for domestic housing and driving house pricesupwards. Right now, property has to be bought with cash or

bank loans at really high interest rates. When new legislationis ratied by the Turkish Parliament in 3 months, the localmarket is set to soar. e same law will allow foreigners to

secure mortgages, which will further boost property pricesin Turkey.

LIBERALISATION OF FOREIGN PROPERTYOWNERSHIP LAWSNew legislation was ratied in December 2005 permittingforeigners to own Turkish property. Now, 100% foreignownership is permitted, as well as 100% repatriation of protsand dividends, creating a favourable climate for investing inTurkish residential property.

BOOMING PROPERTY MARKETDue to the arrival of mortgages and the growing interest inforeign property investors the dynamics of Turkeys property market could be compared to those of Spain 20 or more yearsago (only better), and the country could well emulate thisgrowth and development pattern. In a study carried out by MasterCard in December 2000, Turkish nationals were asked what they would do if they had an additional $20,000. irty-ve per cent said they would buy a house. (For respondents inthe lower to middle income brackets, this gure was 50%.)

Why Invest in Turkey?



MASSIVE FOREIGN INVESTMENT When Turkey began the process towards EU accession lastyear, it immediately led to a surge in international andforeign direct investment, particularly into Istanbul. Foreigninvestment pouring into the country is currently estimatedat $10 billion dollars per year.

STRONG AND GROWING LOCAL MARKETHigh population growth and fast urbanization are the mostimportant factors triggering housing demand in Turkey.

With a local population of more than 70 million, Turkey is among the worlds most populated top 20 countries. ecountrys population growth rate is 2% per year, well abovethe world average. Surprisingly, 70% of the population isyounger than 35, which indicates a strong and growinglocal market.

LARGE EXPATRIATE COMMUNITYere are about 3.4 million expatriate Turkish citizens,

90.5% of whom live in western European countries. It is

estimated that more than 2 million Turks live in Germany alone, of whom more than 47,000 have established small-and medium-sized enterprises with a total annual turnoverof about $25 billion. Much of this money nds its way back to Turkey, where it can be used to buy property.

Why Invest in Turkey?

Did you know...

The only city in the world located on twocontinents is Istanbul, which was the capitalof three great empires (Roman, Byzantine andOttoman) for more than 1,700 years.

Two of the seven ancient wonders of the world,the Temple of Artemis and the Mausoleum atHalicarnassus, are located in Turkey.

Julius Caesar proclaimed his celebrated words,

Veni, Vidi, Vici (I came, I saw, I conquered)in Turkey when he defeated the Pontus, aformidable kingdom in the Black Sea regionof Turkey.

Turks introduced coffee to Europe and the tulipto the Dutch.

St. Nicholas, who became popular as SantaClaus, was born in Demre on TurkeysMediterranean Coast.

The Famous Trojan Wars took place in westernTurkey, which is marked with a wooden statueof the Trojan Horse today.

Anatolia in Turkey is the location of the rstknown beauty contest judged by Paris,with Aphrodite, Hera and Athena as leadingparticipants.

Turkey provides 70% of the worlds hazelnuts;the nut in your chocolate bar is most probablygrown in Turkey.

Ten Reasons Why We Love Turkey

continued..

Turkeys housing shortage is estimated tobe 500,000 units per annum (McKinsey Global Insitute) so demand for new homes is expected to remain very strong for some years.



Turkeys Political Foundation

During the last year you may have heard a lot of newsabout how Turkey was set to start negotiations to enter toEU. While these events have grabbed the headlines, thestory to report about Turkey has so much more depth and

vitality to it than one political process. is is about the

re-emergence of one of the old centres of global power.

In 1923, the great Turkish Attaturk established the modernand secular state of Turkey. He was determined, and hasbeen successful, in establishing a nation populated primarily by Muslims but where religion and the state are clearly separated. is has enabled Turkey to develop moderninstitutions. Its powerful military is constitutionally empowered to ensure that the secular nature of the stateis not challenged.

Historically, Turkeys institutions have not always beendemocratic and in the past there were human rightsproblems. Since 1980, however, Turkey has been movingincreasingly towards a Western democratic prole. eRubicon was crossed in December 2005 when Turkey wasdeemed to have met the Copenhagen Criteria, enablingthe country to open talks with the EU. is event initself is conrmation that Turkeys democracy issignicantly entrenched.

Today, the government is led by Recep Erdogan, whoseparty, e Justice and Development Party, combineseconomic liberalism with Islamic social values. Recepsprogramme consists of driving a programme of economicliberalisation, cleaning up the countrys human rights

record, and getting Turkey into talks with the EU.Specically, the Erdogan government is committed to:

running a scally responsibly budget reinventing government, enabling private

businesses to thrive ongoing privatisation working in collaboration with the IMF

and the World Bank implementing all necessary laws in line

with EU requirements

While there is much debate as to whether EU entry is goodfor Turkey and Europe, given that, at best, entry is tenyears away, it is the changes being wrought now that areimportant. In order for Turkey to entertain any thoughtsof starting negotiations for entry, it had to meet what arecalled the Copenhagen Criteria. ese are the politicalpre-requisites for starting negotiations. at these Criteriahave been met and Turkey began talks on 3rd October2005 should give investors even more condence in this

burgeoning economy.



Tax

CAPITAL GAINS TAXCapital gains tax in Turkey, whether for an individual or acompany, is treated as part of general income tax. Personalincome tax varies from 15-40%. Basic corporate income taxlevied on business prots is 30% in Turkey, but there are plansfor 2006 to reduce this to 20%.

Currently, if you hold on to a property for 4 or more yearsafter the date of purchase, you are not required to pay incometax on capital gains at all.

VALUE ADDED TAX (VAT) VAT (KDV in Turkish) fall within 2 price brackets. 1% is dueon property less than 149m2, 18% due on property of 150m2 or over.

STAMP TAXStamp duty applies to a wide range of documents, including

contracts, notes payable, capital contributions and letters of guarantee. Stamp duty is levied as a percentage of the value of the document at rates ranging from 0.15% to 0.75%. Stamptax is payable by the parties who sign a document. Each andevery signed copy of the agreement is separately subject tostamp tax.

PROPERTY TAXProperty taxes are paid each year on the tax values of land andbuildings at rates varying from 0.1% to 0.6%. In the case of the sale of property, a 1.5% levy is paid on the sales value by both the buyer and the seller. e rates are applied twice forproperty located in the Metropolitan Municipality areas.

Buildings and land owned in Turkey are subject to real estatetax at the following rates: Residences: 0.1% Other buildings: 0.2% Land: 0.1%

DOUBLE TAXATION TREATIESTurkey has signed bilateral tax agreements with 60 countries,including the UK, which means you will not be required topay income tax on capital gains twice.

UK TAX SPECIALISTIf you would like to speak with a UK accountant withregards to your tax position, we recommend Drew Hazellat Taylor Bradshaw and nd him highly knowledgeable.His number is 01799 525 407.

1. Sarah Vaughan, Turkey has all the Trimmings, available at www.channel4.com/4homes/buyingabroad/countryguides/guide_turkey_06.html

2. See All About Turkey at http://www.allaboutturkey.com/tax.htm. Primary sourcereports from Foreign Economic Relations Board (DEIK) and Price Waterhouse Coopers.

e additional costs associated with a property purchase such as legal fees, notary charges and property tax work out to be less than half of the Spanish equivalent at 5% of purchase price versus 10% of purchase price. 1

Channel 4

As with all tax systems, the rules in Turkey are complex and you are strongly advised to seek professional advice froma tax specialist. However, here is a guide as to what you can expect.2



Istanbul

Ranked as the top real estate development market by Urban Land Institute and

Price Waterhouse Coopers

Turkeys No.1 Hotspot All eyes are on the Turkish city of Istanbul in 2006, afterproperty investors reaped returns of up to 85% last year.

ere is now a feeling of anticipation and excitement in theair. Turyap, one of Turkeys largest real estate rms, estimatesresidential property prices in Istanbul will rise 80120% this year, as foreign investment, the start of long-delayed talks to

join the EU and the launch of mortgages spurs the market.



UP TO 60% CHEAPER THAN EASTERN EUROPE According to Ferhunde Ozguler, head of internationalrelations at Turyap, property prices in Istanbul are still5060% less than the Eastern European average and 8090% less than the general European average.

SOARING POPULATION With its area of 5,712 km2, Istanbul covers only 0.7% of Turkey, but it holds more than 15% of the population

within its geographic boundaries. Because of continuousimmigration from the rural areas, the city grows rapidly,by about half a million persons per annum. Each year,1,000 new streets are constructed within the city, andbrand new settlements rise on the east-west axis. epopulation of the city doubles every 12 years, pushing updemand for residential property.

MASSIVE HOUSING DEFICITIstanbul accounts for 10% of the housing gap in Turkey.

ere is currently a decit of 500,000 units in Turkey, with the demand for newly built buildings in accordance with the new earthquake building regulations fuelling theproperty market even further.

MAGNIFICENT HISTORIC CITYHistorically at the crossroads of Europe and Asia, Istanbulis a truly magnicent city. e mighty Bosporus Sea owsthrough the city bringing a vital trade link, with ships

going through 24 hours a day. It also brings drama andbeauty to an already buzzing cosmopolitan city. ink Sydney harbour meets Rome. In fact, Istanbul wasformerly called Constantinople and was once the capitalof the Eastern Roman Empire.

STRATEGIC LOCATIONSituated on the connecting point between the twocontinents, Istanbul is strategically placed in terms of global interactions. e city has been dubbed the capitalof Euro-Asia, and acts as an international gateway forseveral regions. e development in Tasdelen is ideally located only 20 minutes drive from central Istanbul, inone of the safest areas in terms of earthquake risk andonly 2 kilometres from Yenidogan, selected by Bill Gatesas the new silicon valley of Turkey.

KEY ECONOMIC PLAYERIstanbul accounts for around 23% of Turkeys total GDP.

e citys rapid pace of urbanization, its populationdensity, and its centrality to the Turkish economy may

well make it the most important metropolis in the Middle

East and Eastern Europe.

THE COMMERCIAL AND FINANCIAL CENTREOF TURKEY

roughout the ages, Istanbul has been a centre of economic activity, largely due to its geographical locationat the meeting point of Asia and Europe, the Black Seaand the Mediterranean. e city serves as a junctionbetween land and sea trade routes: 36% of the totalexports and 40% of the total imports of Turkey are made

via Istanbul.

MASSIVE FOREIGN INVESTMENTSince Turkey began the road to EU accession in 2005,Istanbul has been ooded with foreign investment. UAE-based Dubai Holding plans to build a pair of twistingskyscrapers in Istanbul for shops, offices, ats and hotelsin a $500 million investment. IKEA opened a store inIstanbul in 2005, and 2006 will bring Harvey Nichols.and a new Soho House Hotel. Conde Naste evendesignated Istanbul as their top tourist destination for2006. A record number of businesses are now establishingbases in Istanbul, and all require professional staff who in

turn require decent accommodation to buy and let. isis fuelling demand, inating rental yields and pushing upresidential and office property prices.

INCREASING AFFLUENCEHalf of the dominating 500 industrial enterprises of Turkey have their factories and business headquartersin Istanbul. Not only is Istanbul the countrys centre of nance and culture, it is also becoming a regional centrefor global companies such as Philip Morris, J.P. Morgan-Chase, Coca Cola, General Electric, Proctor & Gambleand Microsoft. Buoyed by the EU talks, foreign companiesare pouring into Istanbul, creating well-paid jobs andbringing increasing affluence to the city. As Turkeys large,young population gets richer, there will continue to be astrong upward pressure on property prices.

Why Istanbul?



FinikeTurkey is expected to become one of the best performing markets for property in

Europe by 2007 - Amberlamb


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FAQ

Q) What nationalities can buy in Turkey? A) Turkey has a reciprocal agreement for the purchase

of land and properties with the following countries:Germany, Austria, Switzerland, Belgium, Holland,UK, Ireland, Spain, Italy, Canada, Luxembourg,Norway, Australia, France, Greece, and variousother countries.

Q) What documentation will I need? A) Your passport is the only documentation you will

need to purchase a property in Turkey.

Q) Do I need a visa to enter Turkey?

A) You will need a visa to enter Turkey and these canbe obtained at Immigration once you arrive. is will cost 10 for a UK citizen and will be valid for3 months.

Q) How do I bring funds out of Turkey? A) Because of the change in law (Decree 32, August

1989) the Turkish Lira is now convertible so proceedsof the sale of a property can be converted to whatevercurrency you select and subsequently transferred tothe country of your choice.

Q) Can I get a mortgage in Turkey? A) Fidentia, a specialist overseas Mortgage brokers, say

that due a bill being passed in the Turkish courts twomonths ago which lead to a change in legislation,there is no longer a legal restriction on foreigninvestors obtaining a mortgage in Turkey. ere arealready loan products existing, local Turkish nancecompanies are offering secured loans, this howeverisnt regulated and isnt a recommended route togo down. is change in the law will mean thatmortgages will be available as soon as three months,

which will have a dramatic effect on the Turkishproperty market.

Q) Will I have to pay tax or charges when bringingfunds into Turkey?

A) ere are no government charges for transferringfunds, but your bank at home will charge youtransfer fees and receiving banks in Turkey normally have a small charge also. ere are government taxcharges when buying a property and annual property taxes also.

Q) If I sell my property, can I freely transfer my fundsout of Turkey?

A) Yes, Turkey has a very liberal investment climate,including free (international) movement of capital,

prots, dividends and salaries, free-trade zones andsubsidies. Again, small bank charges may apply.

Q) What religion(s) is most established in Turkey? A) 99% of the Turkish population is Muslim. However

due to the nature of the secular state, everyonein Turkey has full freedom of religious belief. InTurkey you will nd Catholic, Orthodox, Protestantand Armenian churches, as well as Synagogues,and everyone is free to practice the religion of his choosing.

Q) Are double taxation treaties in place? A) Turkey is a signatory to a treaty for the prevention

of double taxation with 60 countries throughout the world, including the UK.


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