Buying Real Estate in Turkey: A Value Trap?

 Foreigners are buying real estate in Turkey more than ever. Property values in Istanbul are among Asia’s lowest, and the Turkish government is encouraging foreigners to invest.

Is it possible these investors are making a mistake though? With real estate prices hovering around just US$1,000 per square meter in Istanbul, is buying Turkish real estate too good of a deal to be true?

There are indeed many positive aspects to investing in Turkey’s property market. A strategic location at the crossroads of Europe and Asia makes the country an ideal regional business hub.

Likewise, real estate values in major Turkish cities like Istanbul, Ankara, and Izmir are not only cheap… but investing here will also open a path to citizenship and obtaining a second passport.

Turkey’s appeal is evident, between its low property prices and citizenship. Still, you should consider the drawbacks of any investment decision.

In this article, we’ll discuss how you can become a Turkish citizen by purchasing real estate, the related taxes you must pay, property prices in Turkey, and perhaps most important: the nation’s fairly dire economic issues that you should consider.

INVEST IN TURKISH PROPERTY, GET A FREE PASSPORT

While not all Asian countries allow foreigners to own property on their soil, foreigners can buy land, condos, and other types of real estate in Turkey on a freehold basis.

The government is actively encouraging foreigners to invest in Turkey through their citizenship by investment program.

Turkey’s citizenship by investment program is one of the biggest draws to buying real estate here. Purchasing a condo, house, or any other type of property in the country that’s worth at least US $250,000 can lead to Turkish citizenship almost immediately.

FEES AND PROPERTY TAXES IN TURKEY

There are multiple property taxes you’ll need to pay if you invest in real estate in Turkey. The purchasing tax, or title deed tax, is a rather substantial 4% of its sale price. Normally it’s split with half paid by the buyer while the seller pays the remaining 2%.

VAT, or value-added tax, is also applied to real estate in Turkey. Commercial properties have a VAT tax of 18%. Meanwhile, residential properties have a smaller VAT tax that can range from 1% to 18% but is generally on the lower end of that scale.

Foreign investors have the option of waiving the VAT tax if they meet specific conditions, such as agreeing to not sell the property for at least a year.

You’re also required to pay annual real estate taxes in Turkey. They’re cheaper than in most other countries, ranging from 0.1% to 0.6% of a property’s total value. Nonetheless, annual taxes are an ongoing cost that you should consider before investing here.