The
buying process in Turkey
 The main reason that properties in Turkey are so cheap is
the immaturity of this market – with no competitive mortgage market,
as yet, for nationals let alone foreign buyers (to find out more about
the current options, see How to finance your property
purchase below).
This means that most sales in Turkey are cash sales - where the purchaser
pays a deposit, followed by an interim payment and a final payment on
completion (for off-plan purchases, the buyer is usually required to
put down a larger sum pre-completion).
Protect your investments
Since the cash payments are made to the vendor, the buyer must have
guidance from an agent and an independent lawyer to ensure everything
is in order. The solicitor will draw up the sales agreement and check
the title of the property to ensure the vendor actually owns it. They
will also check whether there are any charges on the property, that building
licences and permissions are in order, and that any terms and conditions
from the vendor are fair and reasonable.
UK buyers often look for translated
sales agreements from a legal translator, so each party fully understands
the other’s expectations.
Fees are usually paid once the sales agreement
has been signed, to include deposit, legal fees and agency fees. Solicitors’ fees
can range from €350 - €2,000 – depending on whether local
professionals, your own lawyer, or both, are retained - while agents
charge around 3% (to the buyer and seller). Legal translators charge
around €100
and notaries will charge about €90 for Power of Attorney and a translator.
Military
clearance
The paperwork is then sent off to the title deeds office (for the transfer
of title) and they will send the passports/ID cards and title deeds (or
Tapu) off for the military check to make sure the property is not within
a certain radius from a Turkish military base. Since this can take from
2-3 months (or more due to the recent suspension of the Land Registry
Act), some buyers decide to give the local solicitor a Power of Attorney
to sign for the release of the deeds once they have been authorized (some
agents offer this Power of Attorney service but an independent lawyer
is more advisable).
At this point, the release of the title deeds is signed
in the presence of a notary (again, this can be done in absentia through
Power of Attorney) and you will usually have to pay the balance due on
the property - as well as various taxes and fees. These fees/taxes are
listed below (please note that they will vary depending on location):
- Buyer’s
tax: Between 1.5% and 3% of the sale agreement price
- Government tax:
From €150
- €750
- Property tax: Based on property type and location, it is approximately
0.5% to 0.6% of the property price (paid yearly)
- Utility connection fee: Based on property type/location, between €300
and €500
- Earthquake insurance: Since much of Turkey is in an earthquake zone,
this insurance is required by law and depends on property price and
location
- Other costs will include furnishings (white goods, soft furnishings,
etc) and for complexes there are maintenance costs of about £50
a month
Turkey enjoys a bilateral agreement to avoid dual taxation for UK buyers,
but taxes are still determined by local authorities. The majority of
property ownership is freehold, to include land as well as property,
but there are some restrictions on title that buyers should be aware
of (see The law of the land in Turkey below).
Promising a low cost of living, as well as cheap property with good
growth potential, Turkey could become a key market for retirees. Those
who plan to stay in the property for more than three months will need
to leave the country and re-enter to re-new their visa - although property
owners living in Turkey can buy a residency visa for one year (from £240
or £915 for five years). Those looking to set up a business will
still need to apply for a residency visa and work permit.
Still seen as an emerging market with a lot of promise, Turkey fulfils
much of the criteria for a range of buyer types. It’s worth bearing
in mind, though, that the climate will vary in the north and south with
much colder winters in the north. This should inform your choice of property
and location based on whether you are looking to emigrate, retire, let
to tourists or professionals or buy a holiday home. Back
to Top ^
How to finance your property purchase
 A key reason why property is so cheap in Turkey is the lack of an established
and competitive mortgage market. Domestic mortgage products were introduced
by Turkish lenders last year but nothing is currently available for foreign
buyers as yet. However, while there are still a number of options available
to people who want to buy in this market, purchasers should be aware
of the current regulations to ensure they do not expose themselves to
unnecessary losses.
First of all, current regulations state that any monetary transaction
which exceeds YTL8,000 (or £3,000) must be made through banks,
private financial agencies or the post office (PTT). This is to ensure
all transactions are documented, thus providing clear proof in the event
of a dispute.
Although it is possible to pay in sterling, US dollars or euros, it
is often recommended that the currency is converted to New Turkish Lira
(YTL) and price terms in the contract are set in this currency to reduce
conversion errors (thus avoiding any tax evasion complications). However,
it is possible to open accounts in any currency in Turkey and there are
no limits on foreign currency accounts.
A key thing to remember with savings/deposit accounts in Turkey (where
interest is paid at the end of the savings term) is that if the money
is withdrawn before the end of the term then no interest is paid and
you only receive the principal. Many Turkish banks will automatically
set another savings term if the money is not withdrawn at the end, so
it’s worth checking whether this is the policy (they would usually
repeat the period renewal and apply current interest rates to the accumulated
amount as the new principal).
Back
to Top ^
Getting Started Buying in Turkey
To open a bank account in Turkey in your own name you would need to
get a tax number from a local tax office and then submit it with a copy
of your passport to the appropriate bank branch. Due to strict banking
regulations in Turkey, no one else will be able to withdraw money or
view details about your account unless they have Power of Attorney or
are a joint account holder.
While Turkish citizens and foreign nationals
have equal ownership rights, some provisions of the Title Deeds Law became
void on 26th July - thus suspending all property buying transactions
by foreign nationals. However, a new Act has since been approved and
announced in the Official Gazette (see The law of the
land in Turkey below).
Sourcing finance for Turkish Property
A new mortgage law is also expected, with many predicting that lenders
will enter the market by the middle of 2006. Historically, mortgage loans
to non-nationals have been scarce or unattractive – with low ‘loan
to values’ (LTVs), high rates and low terms on repayment only products
(usually five years). This means that the best option for foreign buyers
is either savings or by remortgaging an existing property at home (those
opting for the latter option should account for possible delays in securing
funding in the UK as it can take up to two months, although a good broker
should be able to speed things up).
Nevertheless, a number of economic reforms are likely to provide impetus
for a mortgage market in Turkey. Lower interest rates have created a
borrowing boom in Turkey, with banks seeing more credit card business.
It is hoped that this cultural change will drive further demand for mortgages
and make them a mass market option for Turkish nationals.
Inflation has settled down in Turkey with consumer prices increasing
at 7.72%, which is below the 8% official target for 2005 and the lowest
for the last 37 years. The government economy taskforce recently announced
its target for 5% inflation this year, and 4% for 2007 and 2008 – all
of which will improve confidence in its business community.
Foreign buyers themselves are creating new economic conditions by raising
property values and feeding the economy by creating new service industries
or buying new products. As the price of property rises beyond domestic
affordability, mortgages will become the only option for Turkish nationals.
Finally, a major factor for the introduction of a more competitive mortgage
market is preparation for a more regulated environment as part of the
ongoing negotiation for entry into the EU - although this is due between
2014 and 2020. In the meantime, mortgages are more likely to be introduced
as a result of domestic market forces. Back
to Top ^
The law of the land in Turkey
On 14th March 2005, the Turkish Supreme Court overturned Article 19
of the new Land Registry (Tapu) Act which permitted foreigners to buy
in village areas of Turkey rather than just on coastal developments.
It also allowed foreigners to own more than 30 hectares of land in Turkey.
The same law eased restrictions on foreigners inheriting in Turkey and
on the various secondary rights like granting and taking mortgages.
The main reason for this u-turn on foreign ownership was concern expressed
by the Main Opposition Party that too much land was being sold off to
foreigners. After a three month transition period following publication
of the decision in the Official Gazette, the relevant provisions of the
Tapu Act became void and property buying transactions by foreign nationals
was suspended on 26th July 2005.
This freeze has created a huge backlog of transactions awaiting official
approval and, while the process should take no more than 2-3 months,
it may be some time before the process returns to normal (there is always
the option of setting up a Turkish company to get around the delay but
there are set up and administrative costs associated with this).
On 7th January 2005, a new act was announced in the Official Gazette,
thus restoring the right of foreign buyers to own property in Turkey.
The new law, which is almost identical to the previous act, will cover
all applications made from 26th July last year.
There are some restrictions under the new law, with land purchases limited
to 2.5 hectares (or 30 hectares with Cabinet Office approval) - although
this has not been aimed at foreign buyers or investors in the main tourist
areas. Back
to Top ^
Typical costs buying Property in Turkey
 Anyone from countries with reciprocal agreements for the purchase of
land and property can buy in Turkey – with all taxes and duties
paid in Turkey recognised in the relevant country of origin. Typical
costs when buying property in Turkey include the following:
- Stamp duty (3% of sale price, with 1.5% paid by the buyer and seller)
- Capital Gains Tax (not payable by private purchasers if it is not
sold within the first four years)
- Personal income tax (based on rental income and capital gains)
- Corporate tax (a company is exempt from any corporate tax as long
as it has been held for at least two years)
- Real estate tax (an annual charge, similar to UK council tax, which
is 0.3% for uncultivated land for development and 0.1% for residential
buildings – although it can be double in some Turkish provinces)
- Inheritance and succession tax (check with a/your lawyer to make
sure your will, drawn up at home, is required in a Turkish court and
the tax implications for the heir if the property is sold)
- Environmental tax (taken as part of water utility bills)
- Earthquake insurance
(compulsory and at a nationwide contribution rate)
For those who wish to develop land, permission must be sought from
local authorities and proposed building specifications must be in line
with official Construction Plans. Since the building owner is liable
for any injury caused by the property due to poor construction, negligence
or misuse, home insurance is recommended. The threat of earthquakes
also means that buildings must be constructed according to a regulated
standard.
It
is important to check whether there are any outstanding debts attached
to the property – such as real estate or utility taxes - as the
new owner will be liable for them (a specific clause can be added to
the sale agreement, however, to clarify that the vendor will still
be liable). It is also worth double-checking land registry details
to make sure the property is not owned by more than one person and
the address of the property matches that on the title deeds.
For anything relating
to ownership, it is recommended that foreign buyers seek the advice
of an independent lawyer to clarify terms on a standard Tapu or title
deed.
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