Property transactions must be made in lira - Erdogan
All property sales and rentals must be made in lira from now on, President Erdogan has announced - but there’s no reason for concern, says Property Turkey director Cameron Deggin.
To support the ailing lira, Erdogan has ruled that from three weeks’ time, all business deals inside Turkey - with the exception of importers and exporters - must be conducted in lira. This includes property sales, rental contracts and leasing transactions.
"We are solving the issue of rent in foreign currency, which concerns a lot of our vendors, once and for all," Mr Erdogan told a meeting of a traders' confederation.
"Every business in this country needs to be priced, discussed and carried out with our own currency," he said.
The news came shortly after the Turkish Central Bank raised interest rates by almost 7 percent to 24 percent, in a bid to curb the lira’s decline. The currency, which has lost almost a third of its value against the dollar since January, rallied after the announcement.
Erdogan has said that further moves to support the lira were on the way.
The decree, which was published in the government’s official gazette a week ago, said all current agreements in the property sector made in foreign currencies must be changed within 30 days.
Real estate sales and rental deals in foreign currency are a way of life in Turkey, especially in the retail sector, with around two thirds of rental contracts in shopping malls conducted in foreign currency.
Some analysts have said the ruling could have a detrimental effect on property in Turkey for sale, especially for overseas buyers.
However, Property Turkey director Cameron Deggin said he disagreed, and that property investors remained bullish to buy property in Turkey.
“It’s the price of the property on the day that matters to buyers. We haven’t seen any concern, we're still fielding plenty of enquiries from buyers looking to invest in Turkey.”
In fact, the next three weeks present buyers with an opportunity, he said.
“While the lira is still low and vendors are setting their prices in lira, there is a window for buyers to act.”
Deggin also expects the lira to fall slightly in the coming days. “After the interest rate announcement, we’ve seen the lira rally against the dollar. I’m anticipating a credit squeeze which will push the lira back down again.”
But that’s only temporary, he emphasises.
“While there’s short term volatility, the lira will inevitably climb. And when it does, there will be gains for anyone wishing to invest in Turkey who takes action during this period.”