When it comes to off-plan property in Turkey, many buyers hesitate, wondering if they'll be scammed - or the developer will run out of money, taking their hard-earned cash with them. We examine the risks and benefits of buying off-plan in Turkey.
"I’ll never buy off plan again"
Dan F decided to buy a holiday apartment or villa in Bodrum in 2005. The graphic designer from Surrey was a long-term fan of Bodrum, and had been holidaying there for fifteen years. He was also well aware of the area's investment potential.
On the first day of a week-long trip to investigate projects in the area, he got talking to a small local developer. The outfit had already completed a building project in Yalikavak, which Dan thought gave them some credibility. The developer was offering units at 20% below market rate, and a good payment plan.
He put down a £8500 deposit and returned to the UK, confident that the following year he’d be winging his way to his two-bedroom Bodrum apartment for the summer.
Sadly for Dan, this scenario didn’t pan out. “After eighteen months had passed with no progress whatsoever I began to get very nervous. After sporadic contact, the developer stopped answering my calls and emails. When I stopped the monthly payments and didn’t hear from them I knew something was badly wrong.”
He turned to internet forums, where he encountered two other buyers who had also bought into the project and found that the police were involved as the developer had disappeared with the money without having begun the project.
“None of us got our money back,” he says. “I felt betrayed and very stupid. I thought I knew what I was doing but when I look back it was an impulsive decision and I should have cast my net a lot wider. All the same, I’ll never buy off plan again, it’s just too risky.”
Off-plan property scams: as old as time
Property Turkey director Cameron Deggin says he’s heard many similar tales during his thirteen years in the business. “Off-plan property scams are as old as time.” he says. “Since I began selling property in 2003 I’ve seen all the scams you could imagine, and then some.”
Not all are actually scams, he points out. “Sometimes it’s an over-ambitious but inexperienced developer who promises the world but can’t deliver. But the end result is the same - money spent, and no property to show for it.”
Most problems originate early on, when buyers rush to close in on a perceived “deal”, he continues. “It’s always the same: something that seems too good to be true, and buyers rush to close this so-called amazing deal without doing enough due dilligence.”
“Buying property is a big - sometimes life changing - move,” Deggin says. “You need to be careful every step of the way. If you are, there is no reason to worry.”
Buying off plan advantages
Off plan offers a dual opportunity for investors, says Deggin. Firstly, they have a chance to pay under market level for a property - no small advantage in an expensive city like Istanbul. Secondly, because they’ve bought it at the first price point, the property will appreciate upon completion, sometimes by as much as 30%.
Buying off plan also allows investors some say in their property - from minor structural changes like turning three bedrooms into two large rooms, to smaller details like colour schemes.
The off-plan property concept is particularly attractive in Istanbul, where the average cost of a centrally located property is high. Buying pre-construction - or even pre launch - can save buyers 30% of the total price.
“In certain well-marketed, prime location projects in Istanbul, the price can easily move up around 25-30% from the pre-launch to completion, a time period of around 18-24 months,” says Deggin.
“So, if you’re an investor, you are best advised to buy off plan, or even better - pre-launch, before the project enters the mainstream market, as there is usually a further 10% off to be had at this stage.”
Payment terms are also attractive to would-be investors buying from large developers, who usually offer 36-40 month payment plans with a 20-30% downpayment.
“In other words, there is a major financial advantage. In fact, this is really the biggest advantage.”
Is buying off-plan property in Turkey safe?
Deggin suggests the following measures to protect yourself from off-plan scams.
Estabished developers: “Go through tried-and-tested developers that have been around a long time. They have a proven track record, but most importantly, they have the capital which means they have a safety net, unlike less established developers, who aren’t as solvent.”
Government-sponsored developers: Emlak Konut developers are government-backed, which means if anything goes wrong you are covered. “In Istanbul the government is heavily invested in infrastructure,” says Deggin. “This is great news for investors as it gives them that extra bit of stability.”
Use established agents: “We’ve been in the market since 2003 and we know everyone: every developer, every agent. This is invaluable knowledge or someone who’s new to the market and doesn’t know which developers have been in the business for two decades, or which have sprung up overnight. A number of agents are less than scrupulous, offering unrealistic terms which buyers often fall for.”
What is the advantage of off plan to the developer?
Property construction is expensive, so developers - as well as their banks - need assurance that the units they’re planning to build will be desirable to buyers. Selling off-plan units informs the bank their investment is secure.
A good developer will constantly assess commercial risk and remove uncertainty wherever possible - even if it’s the cost of profit.
To attract buyers, developers offer favourable payment terms and prices to early buyers, as well as other benefits - rental guarantees and assured exit plans.
So, would Deggin buy off plan?
“Of course. I have in the past and likely will again. As long as you follow the advice you shouldn’t have a problem.”
How to maximise your profit from an off plan Istanbul investment in Turkey
- Buy early, preferably at the pre-launch stage.
- Buy the most sought-after units: a two-bedroom penthouse with a terrace is much more desirable than a one-bedroom, for example.
- Lifestyle facilities within an apartment complex are now standard in Turkey. Look at what the developer is offering in this respect - the better the facilities the greater the chances of selling your apartment on for a good price, as new buyers will expect it.
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