Foreigners who buy Turkish property valued at 250,000 USD or more will soon be eligible for citizenship in Turkey.
Citizenship for Turkey property buyers is the latest in a number of government measures aimed at opening Turkey for investment and bolstering economic growth. Previous initiatives include a year’s residency offered for first-time Turkish property buyers, and lifting restrictions for buyers from countries where Turks could not buy property.
Under the change, which is set to go ahead within the next three months, investors also have the option of making a fixed capital investment of at least 500,000 USD, keep at least 500,000 USD in a Turkish bank account for three years or create 50 jobs in Turkey.
Turkish citizenship to boost property sales
The new law is an attempt to increase property sales, a critical part of Turkey’s economy.
In the first 11 months of 2016, Turkey real estate sales increased by 4.5% to 1.2 million properties over the same period in 2015. However, the sales of properties to foreigners fell by 19%, dropping to 16,727. Analysts say this drop is due to security concerns.
Property Turkey director Cameron Deggin says the law change will transform the Turkish property market. “There’s been a good deal of excitement about this law change within the industry, we think industry experts are correct with the claim that property sales to foreign buyers will double."
Benefits of Turkish citizenship
Visa free travel
A Turkish passport opens up the world. Travelling with a Turkish passport means visa-free access to around 70 countries around the world, from Australia to India.
Working in Turkey will be easier
Gaining a work visa in Turkey has traditionally been difficult. Previously, your only chance of working in Turkey was being sponsored or directly employed by a Turkish company. With citizenship, you’re free to strike out on your own. Turkey is also a newly industrialised country with a young, dynamic workforce: fertile ground for would-be entrepreneurs to make their fortunes. It’s also a huge regional hub, offering entrepreneurs access to Europe and the Middle East.
Turkey: the new tax haven
Turkey is rapidly becoming a tax haven for wealthy foreigners, not merely a place to buy a Turkish villa. As it’s not part of the EU, it’s out of the European regulations remit, making Turkey a under-the-radar choice. Traditional havens like Switzerland are falling out of favour due to the imposition of stricter reporting regulations. Due to its location between the east and the west, Middle Eastern investors are ahead of the game here, and have been investing large amounts in the country for quite some time.
Deggin points out that this is a significant reason behind the popularity of Istanbul real estate with Middle Eastern buyers. “These buyers are targeting Istanbul property because it’s an easy investment - and lack of restrictions helps because it means they can extract their funds whenever they require.”
Healthcare, insurance and bureaucratic ease
You’ll be able to access cheaper healthcare and vote in national and local elections. Buying a car or further properties is easier, and you’ll be able to pay into - and access - the state pension. Insurance policies are cheaper as a citizen, and you’ll be able to access Turkish loans.
Who’s in the queue for Turkish citizenship?
Turkish property has gained traction amongst European citizens in recent years due to ongoing instability within the EU following the recession. Continued political ructions - for example, the spectre of Brexit - have done little to redress the apprehension many EU citizens have about investing in Europe.
Turkey appeals to EU citizens for a number of reasons, not least of which is the country’s high growth expectations: while Turkey’s growth slowed to under 3% last year, it’s projected to pick up to 3.75% by the end of 2017. It’s a stark contrast to Europe, where growth is predicted to hit 1.5% this year.
“The low growth rates across Europe - with the exception of Poland and Romania - aren’t filling investors with confidence,” Deggin says. “Despite the uncertainty we’ve seen in Turkey over the last year, with the coup attempt and the security concerns, the economy is resilient, which is why we can expect further growth.”
Another reason is the Turkish tax system, which is more lenient than other European nations like the UK and France. Capital gains tax, always a concern for buyers, is not payable in Turkey after five years of ownership, unlike most European destinations.
Middle Eastern buyers
Of foreign buyers, in the past two years Iraqis, Saudis and Kuwaitis have bought the highest number of properties in Turkey. Buyers from these countries have been investing heavily in Turkish real estate for the last five or six years, but recently, the momentum has increased due to the high numbers of asset management companies targeting Turkey. Due to dwindling returns in their home countries, these companies have joined the ranks of wealthy individuals to invest in Turkey.
This is particularly true of Saudi Arabia, where the average return on investment has fallen from around 20% to 10%.
For these buyers, ties to Turkey via citizenship are highly advantageous. Turkey’s culture is similar to that of the Middle East, allowing Middle Eastern business people to comfortably do business in large hubs like Istanbul.
Deggin says Property Turkey has had a first row seat to the increasing numbers of Middle Eastern institutional investors coming into Turkey.
He cites a Saudi fund he’s working with in Istanbul who has earmarked $115m to invest in Turkish real estate over the next 24 months. “Our Saudi clients have seen the potential in the Istanbul real estate market. Turkey’s real estate sector is subsidised and heavily supported by the government, which makes it a safe - and lucrative - option for them and other large investors.”
He points out that this client is the tip of a very large iceberg. “Momentum is certainly growing. We’re working with similar clients from Kuwait, Qatar, the UAE - we’re excited to be a part of it.”
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