A tax break offered for first-time property buyers means hefty savings on Turkish property - but it’s likely this will come to an end come September 30. And with Turkish citizenship now granted to anyone buying a property valued at over $1m, the VAT exemption also has the knock-on effect of offering a hefty discount to anyone seeking citizenship.
In February, the government agreed to introduce a VAT (value-added tax) exemption for foreigners. Following a dip in foreign investment after last year’s attempted coup and the ongoing concerns with neighbouring Syria, the 18 percent tax break was a measure designed to increase the volume of real estate investments in Turkey. The move has clearly worked, with the latest figures showing a 24 percent increase in sales of Turkish property to foreign buyers in June.
A flurry of investments
All foreign buyers looking to buy their first commercial or residential properties in Turkey are eligible for the VAT exemption for properties purchased before 30 September 2017. A further condition requires investors to hold onto their properties for at least a year.
Property Turkey director Cameron Deggin said as the government hoped and predicted, the VAT exemption precipitated a flurry of property investments - particularly in Istanbul, where the vast majority of the Turkey’s investment properties are bought and sold.
“The investment climate in Turkey has been excellent, but now it’s at its peak as far as investment is concerned: the low lira value, coupled with large discounts on property prices thanks to the VAT exemption means huge savings for investors.”
Low lira offers further discounts
The lira has dropped by 20 percent against the US dollar since this time last year, offering further opportunities to investors purchasing in dollars, or currencies pegged to the US dollar.
However, while it’s a dramatic drop, it’s likely to stay low as the government unveils economic reforms that will transform the country’s financial landscape, lowering inflation, fuelling economic growth and promoting lending. Turkey’s youthful population, who are increasingly solvent year-on-year, have driven economic growth in the last decade with a huge appetite for goods and services that shows no sign of slowing. These factors will cushion the lira and eventually drive growth.
Citizenship + VAT discount = the ultimate two-for-one deal
With the government now offering the “golden hello” of automatic citizenship for foreign investors buying property valued over $1m, investors have a dual incentive to invest.
He cites the example of his Qatari client, who bought an entire floor at a hotel residence in Basin Ekspres - the area Deggin has dubbed “Media Highway.”
His investment came in at a little under $1.1. Not only was Deggin’s client able to save $198,000 on VAT, he and his wife and two daughters are now in the process of claiming their Turkish citizenship.
“Think of it as the ultimate two-for-one deal,” Deggin says.
The government is now debating whether to reinstate VAT. Insiders believe the measure will come to an end by the end of September. This is Deggin’s belief, too. “All good things must come to an end, and this was always going to be a temporary measure to boost the volume of investment coming into the country.”
However buyers still have time to invest - as long as they aim for newly completed properties or those with a completion date before 30 September, he emphasises. “There’s still two months left to get the deal of a lifetime. Buyers simply need to register their property titles before 30 September to be eligible for the exemption.”
If you’d like to know more, contact Cameron Deggin at [email protected].
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