Investment Property in Turkey

With a steady increase in annual tourism , Turkey is experiencing an unprecedented level of international exposure and this is, in turn is creating more tourist interest and increasing demand for Turkish property. The value of Turkish property is expected to appreciate in beach front areas by as much as 50% initially, with forecasts for the next two to three years reaching 100%. When the Turkish law changes to allow mortgage facilities to become more widely available, property prices are expected to continue to rise accordingly.

The area around Dalaman is particularly popular among Turkey property investors as the Turkish government is improving the tourism infrastructure in an attempt to make this area one of Turkey’s top tourist attractions. This investment includes the expansion of Dalaman airport, the building of three marinas and the area’s first golf course. As this investment programme is only in its early stages, property prices have not yet reacted. This is certainly an area of great potential to property investors.

Why Invest in Turkish Property?

It is widely regarded that now is the ideal time to invest into the Turkish property market. Turkey has started the process of joining the EU, which traditionally makes a huge difference to any property market.

Turkey has a large and fast expanding tourist industry that looks set to continue to grow. creating even more demand for quality accommodation - ideal for off-plan property investors.

Turkey has stunning beaches and a climate that far surpasses many of Europe’s most popular holiday destinations.

Property prices in Turkey are very competitive and all indications show that Turkish property will appreciate rapidly with the introduction of more flights, mortgages as well as a more mature EU application.

Property in Turkey also has an extra appeal to investors: with a huge Turkish population of around 70 million, there is massive demand for property from within Turkey so the market is not totally reliant on foreign investment. If the Turkish EU application is successful then internal demand for quality accommodation in the best locations will be even greater.

Natural and Cultural Factors

The varied landscape of Turkey offers investors a wide choice of areas in which to put their money. Turkey is a present-day marvel while remnants of early civilisations vie with a modern, westward-looking republic.

Beautiful beaches and a diversity of activities make it a popular and well-tested holiday destination

Turkey is known for its unique and very diverse natural features. Turquoise water laps the beaches of the Mediterranean and Aegean coasts as they bask in the hot summer sunshine. While the Black Sea coast is far less explored but wetter and richer in vegetation, at the moment this area is largely devoted to agriculture and is rarely explored by tourists.

Although Turkey is expanding to keep up with the current level of tourist growth, it has a very solid infrastructure that has kept its tourists happy for many years, making it well versed in what is required from a successful holiday destination:

Golfing at the moment is limited to the area around Antalya, but as the industry succeeds and profits are made, it is certain to expand to other areas.

The area around Belek is famous for bird watching and enthusiasts from all over the globe go to indulge their hobby there.

Yachting is another thriving tourist industry – the many small ports and islands make it an ideal destination for boats.

Tourism

To know Turkey would take you a lifetime. This is country is so rich in places to go and things for tourists to see – from the hot springs at Pammukele (known as cotton castle) to the magnificent mosques of Istanbul, there is something for everyone.

Turkish summers are much longer than many other EU destinations

Turkey enjoys a variety of climates, ranging from the temperate climate of the Black Sea region, to the continental climate of the interior, then, to the Mediterranean climate of the Aegean and Mediterranean coastal regions. The coastline touching the four seas that border the country is 8333 km in length.

Climate

The climate in Turkey is second to none and this is the reason behind the success of its tourism industry. The summer is warm and very reliable, bringing sun worshipers from all over the world to its beautiful coastlines. Temperatures range from around 21°C in April to a very hot 31°C in the mid-summer months of July and August.

It is not only the outstanding weather that gives Turkey an edge over its competitors but also the sheer number of hours of sunshine it enjoys each day. In general Turkey benefits from 8 hours of sunshine in the low season (April) to a huge 12 hours in high season.

Many visitors to Turkey can find it too hot in July and August and prefer to visit in either June or September when the temperatures are still in the 80´s while continuing to enjoy around 12 hours of daily sunshine.

The large population means that Turkey has a strong internal property market

While Turkey is enjoying increasing amounts of international investment, property buyers are deciding to buy Turkish property because it has a huge advantage over these other emerging markets: With a large population of over 70 million and as the Turkish economy continues to grow, Turkish people are more in a position to purchase property, especially with the new mortgage rules allowing Turks to use finance for property purchases.

With the Turkish population continuing to grow at the rate of 2% per annum, 70% of this population is under 30 years of age. New finance laws and possible inclusion into the EU mean the average Turkish citizen will be generally wealthier. The future looks bright for the domestic property market in Turkey and therefore it is equally promising for overseas investors owning property in prime locations.

Economic Factors

Stunning beaches and climate make it a very popular and well tested holiday destination. Turkish summers are a lot longer than many other EU destinations offering more hours of sunshine per annum. Turkey has a huge population of 70+ million. This creates a strong internal property market meaning investors are not reliant on international investors for resales. Turkish population growth is around 2% per annum with 70% of the population younger than 30, this creates a strong local market. Low cost of living and long summers make it a favorite retirement spot for the Europeans. Life in Turkey is easy and inexpensive.

• High capital growth is projected.
• The process for incorporation of Turkey into the EU has started.
• Turkey is at the beginning of a property boom.
• The Turkish economy is very strong and dynamic.
• High tourist numbers are going to increase.
• Golf tourism is being developed.
• Turkey has a modern infrastructure.
• After four years, there is no capital gains tax for property investors.
• Land prices are on the increase.
• Front-line properties with a high return on rental or resale are still available.
• The cost of living is low.

Logistical Factors

Turkey now sits firmly on the tourist map, with its main international airports located at Bodrum, Dalaman and Antalya. Flight time of approximately 3½ hours from the UK and a time difference of only two hours make Turkey a close and easy destination to reach, while visitors enjoy an exotic culture quite removed from life back home.

During summer, flights go to Bodrum direct from most UK airports, making it a highly popular holiday option. Turkish Airlines and British Airways also fly direct to Istanbul and Izmir all year round. During peak season (May to October) cheap charter flights can be snapped up from operators such as Thomas Cook, First Choice and My Travel, flying into coastal holiday resort airports such as Dalaman, Antalaya and Bodrum.

Turkish Airlines also provides a large network of domestic flights from the international airports of Istanbul, Ankara, Izmir, Adana, Trabzon, Dalaman and Antalya to all of the major Turkish cities. Excellent bus connections serve all airports and city terminals. Major airports in Turkey include: Istanbul (Atatürk and Sabiha Gökcen), Ankara (Esenboga), Izmir (Adnan Menderes), Adana, Trabzon, Van Erzurum, Bursa, Samsun, Antalya, Dalaman and Milas-Bodrum.

Turkey can also be accessed via any of its 15 major state-owned ports on the Mediterranean and Black Seas running along its 8,430 km of coastline. These giants are to be found at Samsun, Haydarpasa (Istanbul), Izmir, Izmit, Trabzon, Mersin, and Iskenderun, all of which run extensive passenger ferry services.

The quality of Turkey's infrastructures has its strengths and weaknesses and the Turks have some way to go to reach EU standards in terms of some social infrastructure, and reform measures are underway in order to bring these up to expected levels. Roads are a high priority in Turkey and they are well constructed in accordance with Asian and Middle Eastern international road standards. Unlike in many emerging markets, Turkey has a very adequate road infrastructure in place and at the ready to cope with the rapid growth is it set to undergo.

Roads are well complemented by a wide network of the Turkish State Railways, extending some 8,697 km, and connecting most major cities. Turkish trains are very comfortable and new with couchettes, restaurants, and lounge cars offering first and second class services to modern European standards.

Property Investment Strategies for Turkish Property

Short Term Investment Strategy

Key Opportunity

As an aspiring member of the EU, Turkey attracts investors looking to profit from a success story in the making. Shrewd buyers are acting fast in this emerging market, while the country undergoes rapid growth and reforms to bring it up to the standards required for eventual EU membership. Turkey is currently among the top ten destinations for those looking to invest in overseas property, according some independent property advisors.

The Turkish government is addressing its enormous housing deficit. Currently this stands at 600,000 houses in Turkey's main cities (and around 250,000 in Istanbul itself) and the government aims to raise the standard of living and foreign investment in city property such as Istanbul is regarded as a positive step towards that goal. With increased economic activity and demand well outstripping supply, it is clear that short term investment in carefully selected Turkish property will bring significant returns - last year alone prices in some popular seaside resorts rose by as much as 52% and the country's capital growth rate ranged from 25% to 40 %.

With strong GDP growth at 5% in 2006 and as a member of the G20, Turkey already figures 22nd among the economic giants of the world. A dynamic emerging market equipped with a well-developed infrastructure, Turkey is working hard to accelerate performance and foreign direct investment (currently circa USD 1 billion per annum), which is expected to increase dramatically over the coming years with the implementation of further economic and judicial reforms.

Turkey is home to a thriving and rapidly growing tourist industry and boasts an increasing amount of budget flights to encourage foreign visitors and buyers alike. Off-plan beach and golf property in and around the many popular coastal resorts generates much foreign interest and is a firm favourite among short term investors looking for reliably high returns on investment.

Timescale

Investors in Turkish off-plan developments factor in between 18 and 24 months for construction from reservation to completion stages. Short term investors normally look to profit from a carefully selected, promising market, selling on their unit to mid or long term investors approximately 14 to 18 months after making their initial reservation, regardless of whether or not the project is yet completed.

Payment terms will vary; good projects will often offer terms of around 30% deposit with a further stage payment during construction and the balance payable upon completion. This allows short term investors to operate their strategy with minimum capital outlay. Of course, the earlier the investment is made, the greater the investment returns. As importantly by entering the project at the earliest possible stage, investors get the best choice of units which will always be first to attract buyers in the future.

Level of Complexity

Short term strategies offer the lowest level of complexity as the purchase has not yet been officially made; therefore, no property taxes or maintenance or management charges are due. This is a simple capital investment, often with no need to proceed to Purchase Contract, or make any mortgage finance arrangements. Remember to check with the developer if there are any charges made to "flip", or reassign your contract, and at what stage you are permitted to do so, before you proceed

Risk Assessment

All investors must carefully assess the particular project and units in which they wish to invest. In many cases a wide range of other projects will be under construction and a choice will need to be made. A decision will need to be based on how a particular development or project will outshine its competitors in terms of appearance, location, on-site facilities and the unit itself. Investors will also need to consider issues such as the number of other units available within the particular development, predicted demand as well as competition for the type of property they wish to invest in.

To curb risk, a short-term investor should normally seek to buy the best possible unit, i.e. a corner unit, a penthouse or ground floor unit with a private garden, which will always sell in preference to a standard first floor unit.

Investors need to be clear how their exit strategy is to run. How will the unit be marketed and by whom? How much will the selling agents charge in commission? Should a buyer not be found prior to completion of the property, investors must be confident they can cover payment to completion of the unit and adapt their strategy if necessary.

Short term "flip" investments are undoubtedly more risky than longer term strategies, but, with careful research and planning in place, off-plan purchase in well located Portuguese projects offers a sound investment with lucrative returns.

Returns

Turkish property offers high capital appreciation of up to 40% per annum, depending on location. Shrewd investors have the opportunity to reach the highest figures by selecting prime developments in cities or resorts at pre-release pricing levels, allowing them to invest at below market value.

By reserving at pre-release stage, investors profit from discounted prices and, in many cases, these are subject to successful planning applications, allowing for additional pricing uplift. Reservations on this type of project allow for full refunds if necessary and secure escrow accounts are in place to protect investors' funds. An earlier than normal reservation of course affords the maximum possible returns on investment on any given project.

Financing

The short term investment strategy is purely based on capital outlay as mortgages cannot generally be raised against property that is not yet built. In order to cover all eventualities, investors MUST be confident they can complete the purchase if necessary, even if using a buy to flip strategy. Developer's mortgages are sometimes available to fund around 80% of the purchase price.

The imminent general introduction of the Turkish mortgages will doubtless increase the desirability and pricing levels of Turkish property in the near future. For now, finance can also be raised by overseas mortgage brokers, normally to a value of 80% of the property price.

Taxation

Purchasing a property and then re-selling prior to completion is a tax-efficient way to invest as it allows buyers in Turkey to avoid any property transfer taxes and side-steps many taxes, including capital gains tax, should they choose to sell on the contract prior to project completion.

We recommend research into any double taxation treaties in place between Turkey and the investor's country of residence.

Medium to Long Term Investment Strategy

Key Opportunity

Turkey hosts a thriving tourist industry and rapidly growing property market, attracting huge foreign interest and investment potential. Its strong economic climate and intent to become an EU member all bode very well for today's timely mid to long term investors in Turkey.

Until now, the absence of finance from Turkish banks has been a sticking point among many investors. However in late 2006 the introduction of Turkish mortgages for up to 80% loan to value was at last confirmed. Shrewd purchasers are now jumping at the opportunity to buy real estate, still at rock bottom prices, in a bid to act now before prices are inevitably driven upwards by the very imminent wide availability of Turkish lending facilities.

A significant tourist market (some 25,000,000 p.a.) creates solid rental yields for investors in key locations. Although Turkey boasts an excellent Mediterranean style climate, many of its resort investments, particularly on the northernmost Black Sea, rely purely on a peak summer tourist season to cash in on rental returns. Turkey's highly popular "Golf Valley" surrounding the region of Antalya is a Godsend to buyers seeking a further investment vehicle from which to benefit from both sea and golf trades, adding year-round investment appeal to this Mediterranean region.

In line with a drive to encourage foreign business to Turkey, the level of foreign investment in Istanbul is duly on the up, with financial institutions such as Morgan Stanley, UBS, Deutsche Bank and Credit Suisse actively researching Istanbul's potential in the commercial sector while Dubai Holding has already committed five billion US dollars to the development of various commercial property projects in Istanbul. Increased commercial investment in Istanbul is having the effect of pushing up demand for both commercial and residential property and, as a result investment potential continues to ride high as demand way outstrips supply.

Timescale

Average construction time on Turkish off-plan developments, from project sales release to completion of construction, is approximately one year. Mid to long term investors look to hold onto their units after construction, normally for at least 18 months from initial reservation, either to rent it out and/or benefit from capital appreciation upon eventual resale. Many long term investors use hotspot locations on Turkey's Mediterranean coast or in city centers such as Istanbul to generate significant and reliable rental income over a period of time as sustained rental returns are their main focus, followed by capital appreciation over time.

Capital appreciation is expected to perform exceptionally well over the next 5 years, and the longer investors are able to leave capital in their purchase, the higher their potential long term returns will be. High tourist numbers, a boom in city business and the resulting strength in the buy-to-let market allows investors to reap in solid capital growth from their properties, all the while supplementing this income with high rental yields in key Turkish locations.

Level of Complexity

In the case of off-plan purchase, full payment for the property needs to be completed at various stages of construction, prior to final completion of the purchase.

For mid to long term investors, all costs will be applicable, of around 10% of the purchase price while ongoing costs such as maintenance, community fees and utility bills will also need to be factored into the strategy finance plan. Bear in mind it's advisable to open a local bank account in order to pay for the property's utilities and other ongoing expenses.

Beneficial arrangements are often to be made with local property management and rental companies that are usually conveniently based on or near the site. These ensure that such ongoing costs are covered and that your unit is rented out regularly. Managed properly, maintaining a property in Turkey can become no more complex than an investment closer to home.

Key Risks

A medium to long term investment strategy entails much lower financial risk than a short term plan which relies on finding a buyer within a very short time frame. Provided the right investment is made on a quality, well located project with multiple facilities, establishing a rental market and eventually a buyer for your investment should not be difficult. However, as with any investment, patience and money is sometimes required until the end user is found.

Turkey's ongoing popularity as a major holiday destination is a positive factor for buy-to-let investors. As the property investment market continues to grow in Turkey, there is now a huge demand for more flights to all main tourist destinations in Turkey. Low cost airlines such as Turkish Airlines are already planning new routes, lower fares and increased services to cater for the increased numbers of visitors. As accessibility increases, Turkish property will become even more sought after and investors will inevitably see encouraging capital appreciation.

Projects in Turkey have bank guarantees in place to ensure that should the developer go bankrupt before completion of your property, your money is 100% safe. In Turkey this is not yet a general legal requirement and, owing to the early stage of the overseas property market in Turkey and the comparatively immature banking system, provisions such guarantees are sometimes impossible or very expensive to achieve. This makes it doubly important to work with developers of substance with proven track records that can offer quality property and who run no risk of running out of capital during the construction phase of a project.

By appointing independent legal representation, the client can be sure that all the necessary paperwork is in place and title ownership is clear before signing the purchase contract. Recommended legal services are always offered independently from project developers, therefore exclusively representing the client's interest at all times.

Property ownership in Turkey is mostly sold Freehold, leaving no room for ownership disputes.

Returns

Both short and long term investments in Turkey are attracting high growth figures. As a long term investor, you will be waiting on your laurels for Turkey's promised membership of the EU while profiting from high rental yields in the meantime. An increase in the number of overseas nationals purchasing in Turkey has helped house prices to rise by 15-22% in the past 12 months and with interest set to continue prior to EU membership, it is unlikely that prices have yet reached their peak.

Many people seeking Turkish property are buying for investment purposes. Some look for a holiday home with the aim of also making a little money along the way, bit others want a dedicated investment property that they may never even visit. Buy-to-let investments are hugely popular in booming tourist hotspots and in cities suffering a short supply of accommodation such as Istanbul, and off-plan buy-to-let investments are offering very encouraging returns and rental yields:

Depending on the area and property in which you choose to invest, growth figures will vary from 25-40%. Average rental yields in key rental locations currently reaches between 5 and 10% depending upon the property.

Taking an average of 25% capital growth, a property purchased at GBP 60,000 with sustained growth over five years will have a market value of GBP 183,105, entailing a huge 305% return on investment.

The "Pure Investment" Approach to Turkish Property

The pure investor is an un-emotional investment property buyer who is purely seeking maximum short term return on capital within the safest investment market in history. Their investment vehicle is the purchase price but the investment involvement is typically only 10 - 30% of the purchase price.

During the development period the developer is likely to increase the development units sale price several times in phases. These price increases inversely mirror the developers risk, as the development matures the developer's exposure diminishes and so they can charge more for their product with each passing stage. Also for the buyer they can see physical progress, get a feel for the property and rely less and less on architect drawings and graphical impressions when making the decision to purchase the property - but pay extra for this luxury

To the "Pure" Investor this creates an excellent investment opportunity. When buying into the development at the earliest stage possible the Investor can benefit from each of the phased price increases showing a profit gain of 30% - 40% (assuming 3-4 phase price increases each of 8% - 10%).

The pure Investor then seeks to re-sell his investment bought early at the best possible price just prior to completion to a secondary buyer who typically wants to live in or rent the property.

In Turkey the "Pure Investor" strategy can also be a longer term investment. With the current market still showing so much future potential many investors are willing to invest in property in Turkey and target good capital growth but over a longer period of time. This involves the investor simply completing on the property and either executing the "Buy to Let" strategy or waiting patiently for the property value to rise and choosing the time to re-sale the investment.

Example Case Study

John decides in conjunction with taking into account his personal criteria to purchase a unit on the development "X" at €630,000.

John pays 30% deposit (including his initial reservation fee) which totals €189,000 and signs a re-assignable contract allowing him to sell prior to the completion of the development units.

The project matures and after several phased stages John negotiates the sale of his purchased unit for €925,000 to a secondary home buyer.

To John the "Pure" investor this represents a huge profit gained on invested capital of 156% (IVA and agents fees have not been included in this example calculation) as he has only ever invested the initial 30% deposit into the property.

Buy to Let Investment Turkey

Imminent changes to the law in Turkey regarding mortgages means that the demand for Turkish property is set to rise dramatically. People investing now can gear existing equity to take advantage of the low level prices offerred by developers before the property buying boom begins.

The term "Buy-to-Let" means simply the purchase and ownership of a property through normal procedure. Once completed the owner seeks to rent this property for a regular income usually exceeding annual mortgage repayments.

The "Buy to Let" Market in Turkey

Turkey is a very unique market. It has so much to offer the overseas property investor at this moment in time that it is becoming ultra popular with buyers looking for a new market in which to generate substantial return on initial investment. Usually emerging markets can present a high level of risk to an investor who purchases property with the view of using a "buy to let" investment model as they are relying on the growth of tourism to provide a constant stream of visitors wishing to rent their property. In Turkey this tourism is already very present and growing at an rapid rate, meaning that there is already a substantial and growing demand for "buy to let" property.

In addition to the massive potential for lucrative holiday rentals the huge Turkish population (70 Million) also means that there is large scope for long term rental. Because of the quality locations and build specifications of many of the best developments along the Turkish coastline many Turkish nationals are keen to purchase holiday homes here and it is estimated that if EU inclusion is granted then Turkish nationals will generally have more available funds and be in a position to purchase quality property in quality areas.

The massive volume of tourism pouring into the main Turkey resorts is also creating a demand for long term accommodation for the tourist service industry, who are re-locating to the area to service the demands of the growing numbers of tourists.

In general the "buy to let" market in Turkey is very healthy and is a major reason why Turkey appeals to investors in overseas property.

Buy to Let Example Case Study

John decides to purchase an investment property and he decides that the "Buy-to-Let" investment strategy is for him.

John has savings of around €80,000.

Investment property X is a new development with beautiful sea views and priced at €250,000.

Initially John pays his reservation fee of €3000 to hold the property.

Next John pays a 30% deposit of €75,000 (minus his €3000 reservation fee already paid)

Our investment specialists negotiate a mortgage for John for the remaining €175,000 at a rate of 2.75% (example only) this translates to a monthly mortgage repayment of €481.00 (interest only) which is equal to €5772.00 over 12 months.

John starts to rent his new property immediately and during the 3 months "High Season" he receives €2000 per month in rental income. These rental payments exceed his annual mortgage repayments and still leaves John with 9 months of rental potential to make a further profit.

If we assume that average rental rates for Johns new property are as follows (conservative figures):

• High Season - €2000 Per Month
• Low Season - €1300 per Month

Now we assume that John decides to go on a short term rental strategy maximizing his income over the High Period. He easily rents his property for 3 Months during the high period earning €2000 per month. After this period he has a delay in getting his next tenants but over the course of the year he rents his property for a further 6 Months only.

• 3 Months x €2000
• 6 Months x €1300

Total Rental income = €13,800 after subtracting the €5,772 Mortgage repayments John has made a profit of €8,028.

* During this example we have not included any rental management or community fees that may apply but also we have only assumed rental income for 9 months of the year and with many holiday makers now booking private accommodation via the Internet this is very achievable.

Short-Term Letting vs Long-Term Letting

The final decision to be made by the "Buy to Let" Investor is which letting strategy to use. Its obvious that the highest income is made by the property owner by letting out short term during the high season. However you can off-set this against the increased overheads in constantly finding short term rental clients and the maintenance costs between clients. Long term rentals typically pay less on a month on month basis but usually require far less input from the property owner and the rental income is fixed over the course of the year. Some property owners choose to rent long term during the low season and then short term to higher paying holiday clients during the high season. The decisions to be made on your letting strategy are usually answered in part by the property you purchase. Some properties lend themselves to short term holiday makers and others to long term locals as a permanent home. Our experts will help you decide what's best and choose the property and rental strategy that's best for you.

The "Buy to Let" Strategy is not ideal for EVERY investor and it is essential that property for this strategy is chosen wisely as it needs to be a rentable property in a popular location to allow the investor to maximize income from the Investment.

The other benefit from this type of Investment is that during the time this property is being rented and earning the Investor an income and holiday home it is still appreciating in value at one of the fastest rates available. All in all the "Buy to Let" Investment model is a sound investment decision and Turkey is currently an ideal location to deploy this strategy.

Off-Plan Property in Turkey

Off-plan investments in Turkey can offer the investor the ability to buy at the lowest price and achieve maximum return on investment. Keeping the property for a long duration allows excellent rental income opportunities. Meanwhile investors enjoy a beautiful holiday home while watching the property’s value appreciate.

Turkey is a tipped as an area of huge investment growth potential. Most of the investment opportunities we offer in Turkey are using off-plan property projects. Whether it is an off-plan villa, townhouse or apartment you are interested in, buying off-plan allows you the opportunity to purchase at the best possible price and allows maximum capital appreciation. You can learn how it is possible to create wealth through off-plan property investment in Turkey below.

Buying off-plan in Turkey at this time allows investors to purchase property at the lowest possible price and with the best possible finance options. It is located in areas that will attract major rental demand and high price appreciation. People who purchase early on our carefully selected Turkey developments will see the greatest returns on their investment.

Investors buying property in Turkey usually look to follow the "buy-to-let" model by purchasing a Turkish property then seeking to rent to the growing numbers of tourists for solid rental yields. During this period, the investor will expect the property value to continue increasing and the value of their investment to rise substantially. Currently property prices in Turkey are rising by 25-40% per annum.

How can property be cheaper if bought off-plan – How does it work?

The developer of any project is always exposed to risk. They want to cap this risk as quickly as possible and limit bank loans and other debts. They do this by selling units off-plan at excellent prices as the buyers cannot see a physical property at this stage and rely on the location and artist impressions, diagrams and computer simulations.

In addition to the excellent price, the investor benefits from an excellent finance structure due to the fact that it is off-plan. The investor usually only needs to pay around 30% of the property value, in the form of a deposit. The balance is due upon completion and can in most cases be financed by a mortgage.

Maximizing Profit From an Off-Plan Investment in Turkey

• Purchasing early
  For reasons mentioned above, developers will offer units well below market value. It is important to buy your off-plan property in Turkey as soon as possible as the market is in its early stages of development. Prices are still very competitive but are already undergoing steep growth curves, thus investors who purchase now will see the greatest profits.
• Purchasing the best units
  As most investors are aware, early purchase offers them the most sought after properties on any given development. Penthouses are firm favorites while the best units always offer higher capital appreciation in the least amount of time and often demand the greatest rental incomes.
• Price increases as development matures
  As the development begins to be constructed the unit’s value rises. There is normally a completed show home built so that buyers are taking less of a risk as they now do not need to rely entirely on plans.
• Price appreciates as more units sell
  As more units are sold within a development, the price of the remaining units rises. This is due to the buyers being able to see current units as mentioned above. Often there is a phase payment structure which mirrors the increasing value of the properties. Obviously to the early investor this means selling the unit will attract a profit that is considerably higher at this stage than when at the time of initial deposit payment.

Financing

Turkish mortgages were agreed in late 2006 and their general introduction is slowly increasing the desirability and pricing levels of Turkish property. Mortgages can also be raised via overseas mortgage brokers, normally to a value of 80% of the property price.

Developer's mortgages are sometimes available to fund around 80% of the purchase price. Charges applicable will vary according to developer and repayments are index linked. Although these deals can sometimes be highly beneficial, it is always advisable to shop around for the best mortgage or other finance arrangement to suit your needs.

Taxation

Turkey offers some beneficial capital gains tax incentives: if you sell your property after four years, no capital gains tax will be charged. Property sold before the period is over will be charged at the standard rate of income tax (between 15% and 35%), calculated on the difference between the buying and selling price.
Property acquired as a gift or through inheritance is subject to taxes of between 1% and 30% of the valuation. Tax paid in another country on inherited property is deducted from the taxable value of the asset. Inheritance tax is payable over the period of three years and in two installments per year.

Property Taxes

• Initial purchase/transfer tax: normally 1.5% of the declared purchase price
• Annual purchase tax: approx. 0.5% of the declared purchase price
• Annual community tax: approx. GBP 8
• Government tax: approx. GBP 100
• Stamp duty: depends upon the value of the document and is charged from 0.15% to 0.75%.
• Value added tax (VAT) was introduced in Turkey in 1985, the implementation of which is similar to that of other European Union countries. VAT rate in Turkey is generally 18% with a few exceptions.
• Tax on rental income: Net rental income is taxed as ordinary taxable income. However, if the net rental income from property let out as a residence does not exceed YTL2,200 (€1,095), the said income is not subject to a declaration and the income is not liable for VAT.
• Withholding tax: levied on rent payments for non-residents who only earn rental income in Turkey. The taxpayer would not have to file a tax return on income from his Turkish property.
• Property tax: Residential premises and land are taxed at 0.1% of their value. This tax rate is doubled if the property is in a metropolitan area.

Summary

Turkey is one of the brightest property investment hot-spots in the emerging overseas property market today and promises a bright future. Property prices are expected to rise if Turkey joins the EU as forecast. The property market is in its initial stages of development, similar to Spain 5-10 years ago, and value for money is currently excellent. Certain areas, such as Istanbul, Dalaman, Antalya and beach-front properties are expected to see the greatest yields in the near future.