Turkey is not only a popular tourist destination but it also attracts foreign investors. What is going on in the country and should you invest in Turkey? Let’s try to find out.
Economic situation in Turkey
Turkey has the 20th largest economy in the world. The country’s GDP is 819 billion dollars. The economy is diverse: the service industry brings the largest portion of revenues (52.7%), then goes the manufacturing sector (31.07%), and agriculture (5.65%).
Notwithstanding certain economic challenges, Turkey remains a strong player in the international arena.
Important factors affecting the economy of Turkey:
- Inflation. The Government’s economic policies have led to significant depreciation of the Turkish lira in recent years. The Turkish authorities are taking measures in response to the situation. They limit loan opportunities for companies that have hard currencies at their disposal and they make companies making profits from export convert the money into Turkish liras.
- National debt. Even though Turkey’s national debt is only 42.6% of the GDP, which is not much, by international standards, it had to pay more than US$ 182 billion in foreign loans to repay in 2023. Because the payments had to be made in hard currencies, the risk of an economic crisis increased.
- Military conflicts and natural disasters. Earthquakes hit Turkey and in addition to that, it is taking part in more than one military conflict. These factors affect the Turkish economy in a negative way.
Speaking about Turkey’s prospects, the country aims to improve its economic ratings. According to some forecasts, Turkey may become the 12th largest economy by 2030 when its GDP reaches 3 trillion dollars. By 2050, it can exceed 5 trillion. This is what the country is aiming at but it has to overcome significant difficulties to achieve these goals.
A review of the real estate market in Turkey
The prices for real property in Turkey were growing in 2023 in spite of an unstable lira and a major earthquake. The price growth can be explained by an increasing interest in Turkish property on the part of foreigners. After all, the climate in the country is wonderful.
In 2023, more than 1,225,000 pieces of property were sold in Turkey. This figure is 17.5% lower than the year before. The number of foreign buyers also dropped by 48% but this fact did not have any positive effect on the prices. The cost of labor and the construction materials grew, the number of construction licenses was smaller, and the price of land plots increased especially in large cities and resort areas.
Foreign direct investments continue to affect the market in Turkey. In 2023, foreigners invested more than 7 billion dollars in the country. They are attracted by the opportunity to obtain legal residence and citizenship of Turkey by investment as well as beneficial tax policies.
Property prices have grown by 11.82% in dollar terms over one year and they have grown by 102.25% over two years. Apartment rental has grown by 42%.
Legal residence and citizenship by investment
The Turkish economic citizenship program attracts foreign investors. You have to buy a piece of property in the country for at least US$ 400,000 to qualify for citizenship. It can be residential or commercial property.
Citizenship of Turkey allows living, working, studying, and obtaining healthcare services in the country. Apart from the main investor, his/ her spouse and children below 18 qualify for citizenship. Turkish citizens do not have visa-free access to the EU.
It is important what amount of money is indicated in the TAPU (property ownership certificate). Property sellers often understate the price in the TAPU to pay less in taxes. Moreover, the price in the TAPU can be 2 or 3 times lower than the price that you have to pay. Thus, you may end up paying US$ 800,000 or more to qualify for citizenship. You should bear this fact in mind when buying real property in Turkey.
Probably the best option would be to buy a hotel suite in Istanbul or a resort town. If it is a large hotel chain, your passive income can be around 7% to 9% per year. The price in the TAPU will be exactly the price you have to pay for the suite.
Rumors have it that the government is deliberating an opportunity to raise the investment threshold to US$ 600,000. This might happen in the future but the decision has not been made so far.
At the same time, the price of legal residence has been raised by 3 times. Now you have to invest at least US$ 200,000 into real property in Turkey to qualify for a legal residence permit. Naturally, it has scared off many investors. However, a legal residence permit is almost as good as a passport: you can live in Turkey for as long as you wish.
We must also note that not all districts in popular cities are ‘open’ for citizenship-by-investment purposes. In particular, 15 districts are ‘closed’ in Istanbul, 6 are ‘closed’ in Antalya, 4 in Alania, 8 in Mersin, 8 in Ankara, and 5 in Izmir. When investing in real property in Turkey you should find out if the city district qualifies for citizenship-by-investment purposes.
Promising regions of Turkey for foreign investors
Turkey is a large country with many interesting places. Let’s see what regions are most popular with foreign investors.
The choice of real property is great in Turkey. Foreign applicants for citizenship most often invest in apartments and villas in the country.
They usually buy property in the following 5 cities: Istanbul, Antalya, Mersin, Ankara, and Izmir. In 2023, foreigners purchased about 50,000 pieces of property in these cities.
Risks involved in investing into Turkey
Investing into real property in Turkey can bring many benefits but certain risks are involved in the process too. Below we list the most important of them.
- Unstable currency. The Turkish lira is unstable. The price of your property in dollars may decrease over time. Or it may increase.
- Political instability. Turkey is in conflict with Syria and Kurds. This fact may affect the property rights issues, the tax rates, and other aspects of life.
- Economic instability. The overall economic instability in Turkey may also affect your return on investment.
- Legal risks. Please apply for professional assistance with legal issues related to property rights in Turkey, rent regulations, and so on. Misunderstanding a legal aspect may cause trouble.
- Seasonal factors. Turkey is not a year-round resort. The demand for your hotel suite is going to be at different levels in different seasons.
Prospects for the future
The development of the real estate market in Turkey in 2024 depends on numerous factors. We expect that the current tendencies are going to continue and the property prices are going to keep rising. How fast? It’s hard to tell.