Investment Strategies For Turkey

Turkey's fast growing economy and government incentives help make it a highly attractive investment location, while international exposure regarding its possible EU inclusion brings with it a growing number of tourists and investors.

General Factors

Turkey offers visitors a heady mix of European, Arabic and Asian influences. Purchasers of investment property in Turkey generally buy into one of two markets: the vast majority purchase on the coast where prices in popular seaside resorts have risen by as much as 52% in the last 12 months. Increasing numbers of other canny investors are today looking to the expanding city of Istanbul which is also currently enjoying a strong and growing economy, bringing on a resulting building boom to supply a strong demand for commercial and residential properties.

In common with many emerging markets on the threshold of full EU membership, Turkey's city investment arena is now taking a strong hold, where increased foreign investment and new commercial activity in centres such as Istanbul are prompting some great investment opportunities in both residential and commercial property - Ikea opened a store in Istanbul in 2005 and has been followed this year by Harvey Nichols. Currently there is currently an annual unit shortfall in Istanbul property totaling some 250,000, translating to a strong opportunity for timely investors into the retail property market.

As in many countries today, golf is one of the driving forces in the tourist economy and Turkey makes no exception, offering very well priced off-plan options within stunning golf courses. Investors seek to profit from high growth figures and reliable buy-to-let rental yields. Turkey currently attracts some 25 million tourists per annum, indicating an enormous demand for tourist amenities and accommodation. Solid rental yields can be obtained by investors who carefully purchase in buy-to-let properties in the hotspot locations along the coastal strips of the Mediterranean Sea such as Bodrum, Izmir, Antalya, Kas and Fetiye, and these are well served by airports at Izmir, Dalaman and Antalya. Istanbul simply bursts with culture and beauty, also giving it immense tourist appeal and investors are wisely snapping up carefully selected off-plan properties to boost a growing market for city residential and commercial investments.

The transport infrastructure in Turkey has seen much improvement in recent years in anticipation of meeting EU standards, while air links are second to none, welcoming international flights laden with holiday makers to serve the buy-to-let investments of wise purchasers in key tourist locations.

Economic Factors

A major indication of the current state of any property market is the tourist trade. In Turkey this market is expanding massively as the country gains more exposure, international flights and package deals become more widely available and the possibility of Turkey becoming an EU member country begins to take hold.

Currently on the road to possible EU inclusion, Turkey needs to address many factors before incorporation. With strong backers for its entry, Turkey's eventual inclusion will doubtless bring with it an increase in property prices, in line with a surge in overall economic activity. Many investors are purchasing in Turkey and eventual EU inclusion is a major driving force, allowing them to take full advantage of the current low property prices and growing rental market.

As the 22nd largest economy in the world, Turkey is currently strong and undergoing much further growth. After an average growth of only 2.8 % for ten years from 1993 to 2002, Turkey was able to achieve a growth rate of 5.9 % in 2003 and a substantially higher rate in 2004. According to the Economist GDP growth is "forecast to be around 5% in 2007 and 2008 before picking up slightly to about 5.5% in 2009 on the back of a pick up in domestic demand growth and continued robust export growth".

Political Factors

As a founder member of the United Nations and a member of NATO since 1952, Turkey is considered to be a politically stable country, despite ongoing squabbles with Greece over the divided island of Cyprus and various air and sea boundaries of the Aegean Sea. The Cyprus issue has been an ongoing problem for many years and has now become one of the main points of contention in Turkey's accession negotiations with the EU. The Turkish government has much interest therefore in coming to a resolution with Greece and concerted efforts are being put into place to put an end to the dispute, while working at a diplomatic solution with Greece. Greece is seen to actively support Turkey in its bid, since 2005 for EU accession. This process is thought to take at least 15 years due to the great size of Turkey and its political situation.

Despite continuing to foster relations with the Eastern world, Turkey is progressively integrated with the West and is currently proactively implementing necessary measures to qualify it for EU membership in the near future.

Turkey is a parliamentary representative democracy with a President, currently Ahmet Necdet Sezer, at the head of state elected in 2000 for a seven year term. Executive power is however given to the Prime Minister and the council of ministers that make up the government, while legislative power is given to the Grand National Assembly of Turkey.

Natural Factors

Turkey is famed for its unique and diverse natural features. Turquoise water laps the beaches of the Mediterranean and Aegean as they bask in the hot summer sunshine, while the hot springs at Pammukele and the volcanic terrain of Cappadocia offer great contrasts to all who visit Turkey.

The diversity of the Turkish landscape allows for a varied, though chiefly Mediterranean climate, averaging more than 300 days of sunshine per year. Along the Mediterranean and Aegean coasts, summers are long and dry with temperatures topping 44°C. In contrast, Istanbul sits on the Black Sea coast where temperatures are a little milder, and even has occasional snow falls in winter. Temperatures in the mountains running parallel with the coasts can be quite a bit harsher, more arid and cooler than in coastal regions, and heavy snow is a common sight during winter months.

Due to weather conditions, the Turkish tourist season is considered to be from June to September and concentrates on the fashionable coastal resorts of the south and west.

With a large population of over 70 million and a growing economy, the Turkey property market is now open to the Turkish people as a new wealthier, professional population sector is now in a position to purchase property, particularly with the introduction of new mortgage rules allowing Turks to use finance for property purchase. The Turkish population continues to grow at the rate of 2% per annum while 70% of this population is under 30 years of age. New finance laws and possible inclusion into the EU mean the average Turkish citizen will be generally wealthier. The future therefore looks bright for the domestic property market in Turkey and therefore it is equally promising for overseas investors in prime locations.

Logistical Factors

Turkey now sits firmly on the tourist map, with its main international airports located at Bodrum, Dalaman and Antalya. Flight time of approximately 3½ hours from the UK and a time difference of only two hours make Turkey a close and easy destination to reach, while visitors enjoy an exotic culture quite removed from life back home.

During summer, flights go to Bodrum direct from most UK airports, making it a highly popular holiday option. Turkish Airlines and British Airways also fly direct to Istanbul and Izmir all year round. During peak season (May to October) cheap charter flights can be snapped up from operators such as Thomas Cook, First Choice and My Travel, flying into coastal holiday resort airports such as Dalaman, Antalaya and Bodrum.

Turkish Airlines also provides a large network of domestic flights from the international airports of Istanbul, Ankara, Izmir, Adana, Trabzon, Dalaman and Antalya to all of the major Turkish cities. Excellent bus connections serve all airports and city terminals. Major airports in Turkey include: Istanbul (Atatürk and Sabiha Gökcen), Ankara (Esenboga), Izmir (Adnan Menderes), Adana, Trabzon, Van Erzurum, Bursa, Samsun, Antalya, Dalaman and Milas-Bodrum.

Turkey can also be accessed via any of its 15 major state-owned ports on the Mediterranean and Black Seas running along its 8,430 km of coastline. These giants are to be found at Samsun, Haydarpasa (Istanbul), Izmir, Izmit, Trabzon, Mersin, and Iskenderun, all of which run extensive passenger ferry services.

The quality of Turkey's infrastructures has its strengths and weaknesses and the Turks have some way to go to reach EU standards in terms of some social infrastructure, and reform measures are underway in order to bring these up to expected levels. Roads are a high priority in Turkey and they are well constructed in accordance with Asian and Middle Eastern international road standards. Unlike in many emerging markets, Turkey has a very adequate road infrastructure in place and at the ready to cope with the rapid growth is it set to undergo.

Roads are well complemented by a wide network of the Turkish State Railways, extending some 8,697 km, and connecting most major cities. Turkish trains are very comfortable and new with couchettes, restaurants, and lounge cars offering first and second class services to modern European standards.

Short Term Investment Strategy

Key Opportunity

As an aspiring member of the EU, Turkey attracts investors looking to profit from a success story in the making. Shrewd buyers are acting fast in this emerging market, while the country undergoes rapid growth and reforms to bring it up to the standards required for eventual EU membership. Turkey is currently among the top ten destinations for those looking to invest in overseas property, according some independent property advisors.

The Turkish government is addressing its enormous housing deficit. Currently this stands at 600,000 houses in Turkey's main cities (and around 250,000 in Istanbul itself) and the government aims to raise the standard of living and foreign investment in city property such as Istanbul is regarded as a positive step towards that goal. With increased economic activity and demand well outstripping supply, it is clear that short term investment in carefully selected Turkish property will bring significant returns - last year alone prices in some popular seaside resorts rose by as much as 52% and the country's capital growth rate ranged from 25% to 40 %.

With strong GDP growth at 5% in 2006 and as a member of the G20, Turkey already figures 22nd amongst the economic giants of the world. A dynamic emerging market equipped with a well-developed infrastructure, Turkey is working hard to accelerate performance and foreign direct investment (currently circa USD 1 billion per annum), which is expected to increase dramatically over the coming years with the implementation of further economic and judicial reforms.

Turkey is home to a thriving and rapidly growing tourist industry and boasts an increasing amount of budget flights to encourage foreign visitors and buyers alike. Off-plan beach and golf property in and around the many popular coastal resorts generates much foreign interest and is a firm favourite amongst short term investors looking for reliably high returns on investment.


Investors in Turkish off-plan developments factor in between 18 and 24 months for construction from reservation to completion stages. Short term investors normally look to profit from a carefully selected, promising market, selling on their unit to mid or long term investors approximately 14 to18 months after making their initial reservation, regardless of whether or not the project is yet completed.

Payment terms will vary; good projects will often offer terms of around 30% deposit with a further stage payment during construction and the balance payable upon completion. This allows short term investors to operate their strategy with minimum capital outlay. Of course, the earlier the investment is made, the greater the investment returns. As importantly by entering the project at the earliest possible stage, investors get the best choice of units which will always be first to attract buyers in the future.

Level of Complexity

Short term strategies offer the lowest level of complexity as the purchase has not yet been officially made; therefore, no property taxes or maintenance or management charges are due. This is a simple capital investment, often with no need to proceed to Purchase Contract, or make any mortgage finance arrangements. Remember to check with the developer if there are any charges made to "flip", or reassign your contract, and at what stage you are permitted to do so, before you proceed

Risk Assessment

All investors must carefully assess the particular project and units in which they wish to invest. In many cases a wide range of other projects will be under construction and a choice will need to be made. A decision will need to be based on how a particular development or project will outshine its competitors in terms of appearance, location, on-site facilities and the unit itself. Investors will also need to consider issues such as the number of other units available within the particular development, predicted demand as well as competition for the type of property they wish to invest in.

To curb risk, a short-term investor should normally seek to buy the best possible unit, ie. a corner unit, a penthouse or ground floor unit with a private garden, which will always sell in preference to a standard first floor unit.

Investors need to be clear how their exit strategy is to run. How will the unit be marketed and by whom? How much will the selling agents charge in commission? Should a buyer not be found prior to completion of the property, investors must be confident they can cover payment to completion of the unit and adapt their strategy if necessary.

Short term "flip" investments are undoubtedly more risky than longer term strategies, but, with careful research and planning in place, off-plan purchase in well located Portuguese projects offers a sound investment with lucrative returns.


Turkish property offers high capital appreciation of up to 40% per annum, depending on location. Shrewd investors have the opportunity to reach the highest figures by selecting prime developments in cities or resorts at pre-release pricing levels, allowing them to invest at below market value.

By reserving at pre-release stage, investors profit from discounted prices and, in many cases, these are subject to successful planning applications, allowing for additional pricing uplift. Reservations on this type of project allow for full refunds if necessary and secure escrow accounts are in place to protect investors' funds. An earlier than normal reservation of course affords the maximum possible returns on investment on any given project.


The short term investment strategy is purely based on capital outlay as mortgages cannot generally be raised against property that is not yet built. In order to cover all eventualities, investors MUST be confident they can complete the purchase if necessary, even if using a buy to flip strategy. Developer's mortgages are sometimes available to fund around 80% of the purchase price.

The imminent general introduction of the Turkish mortgages will doubtless increase the desirability and pricing levels of Turkish property in the near future. For now, finance can also be raised by overseas mortgage brokers, normally to a value of 80% of the property price.


Purchasing a property and then re-selling prior to completion is a tax-efficient way to invest as it allows buyers in Turkey to avoid any property transfer taxes and side-steps many taxes, including capital gains tax, should they choose to sell on the contract prior to project completion.

We recommend research into any double taxation treaties in place between Turkey and the investor's country of residence.

Medium to Long Term Investment Strategy

Key Opportunity

Turkey hosts a thriving tourist industry and rapidly growing property market, attracting huge foreign interest and investment potential. Its strong economic climate and intent to become an EU member all bode very well for today's timely mid to long term investors in Turkey.

Until now, the absence of finance from Turkish banks has been a sticking point amongst many investors. However in late 2006 the introduction of Turkish mortgages for up to 80% loan to value was at last confirmed. Shrewd purchasers are now jumping at the opportunity to buy real estate, still at rock bottom prices, in a bid to act now before prices are inevitably driven upwards by the very imminent wide availability of Turkish lending facilities.

A significant tourist market (some 25,000,000 p.a.) creates solid rental yields for investors in key locations. Although Turkey boasts an excellent Mediterranean style climate, many of its resort investments, particularly on the northernmost Black Sea, rely purely on a peak summer tourist season to cash in on rental returns. Turkey's highly popular "Golf Valley" surrounding the region of Antalya is a Godsend to buyers seeking a further investment vehicle from which to benefit from both sea and golf trades, adding year-round investment appeal to this Mediterranean region.
In line with a drive to encourage foreign business to Turkey, the level of foreign investment in Istanbul is duly on the up, with financial institutions such as Morgan Stanley, UBS, Deutsche Bank and Credit Suisse actively researching Istanbul's potential in the commercial sector while Dubai Holding has already committed five billion US dollars to the development of various commercial property projects in Istanbul. Increased commercial investment in Istanbul is having the effect of pushing up demand for both commercial and residential property and, as a result investment potential continues to ride high as demand way outstrips supply.


Average construction time on Turkish off-plan developments, from project sales release to completion of construction, is approximately one year. Mid to long term investors look to hold onto their units after construction, normally for at least 18 months from initial reservation, either to rent it out and/or benefit from capital appreciation upon eventual resale. Many long term investors use hotspot locations on Turkey's Mediterranean coast or in city centers such as Istanbul to generate significant and reliable rental income over a period of time as sustained rental returns are their main focus, followed by capital appreciation over time.

Capital appreciation is expected to perform exceptionally well over the next 5 years, and the longer investors are able to leave capital in their purchase, the higher their potential long term returns will be. High tourist numbers, a boom in city business and the resulting strength in the buy-to-let market allows investors to reap in solid capital growth from their properties, all the while supplementing this income with high rental yields in key Turkish locations.

Level of Complexity

In the case of off-plan purchase, full payment for the property needs to be completed at various stages of construction, prior to final completion of the purchase.

For mid to long term investors, all costs will be applicable, of around 10% of the purchase price while ongoing costs such as maintenance, community fees and utility bills will also need to be factored into the strategy finance plan. Bear in mind it's advisable to open a local bank account in order to pay for the property's utilities and other ongoing expenses.

Beneficial arrangements are often to be made with local property management and rental companies that are usually conveniently based on or near the site. These ensure that such ongoing costs are covered and that your unit is rented out regularly. Managed properly, maintaining a property in Turkey can become no more complex than an investment closer to home.

Key Risks

A medium to long term investment strategy entails much lower financial risk than a short term plan which relies on finding a buyer within a very short time frame. Provided the right investment is made on a quality, well located project with multiple facilities, establishing a rental market and eventually a buyer for your investment should not be difficult. However, as with any investment, patience and money is sometimes required until the end user is found.

Turkey's ongoing popularity as a major holiday destination is a positive factor for buy-to-let investors. As the property investment market continues to grow in Turkey, there is now a huge demand for more flights to all main tourist destinations in Turkey. Low cost airlines such as Turkish Airlines are already planning new routes, lower fares and increased services to cater for the increased numbers of visitors. As accessibility increases, Turkish property will become even more sought after and investors will inevitably see encouraging capital appreciation.

Projects in Turkey have bank guarantees in place to ensure that should the developer go bankrupt before completion of your property, your money is 100% safe. In Turkey this is not yet a general legal requirement and, owing to the early stage of the overseas property market in Turkey and the comparatively immature banking system, provisions such guarantees are sometimes impossible or very expensive to achieve. This makes it doubly important to work with developers of substance with proven track records that can offer quality property and who run no risk of running out of capital during the construction phase of a project.

By appointing independent legal representation, the client can be sure that all the necessary paperwork is in place and title ownership is clear before signing the purchase contract. Recommended legal services are always offered independently from project developers, therefore exclusively representing the client's interest at all times.

Property ownership in Turkey is mostly sold Freehold, leaving no room for ownership disputes.


Both short and long term investments in Turkey are attracting high growth figures. As a long term investor, you will be waiting on your laurels for Turkey's promised membership of the EU while profiting from high rental yields in the meantime. An increase in the number of overseas nationals purchasing in Turkey has helped house prices to rise by 15-22% in the past 12 months and with interest set to continue prior to EU membership, it is unlikely that prices have yet reached their peak.

Many people seeking Turkish property are buying for investment purposes. Some look for a holiday home with the aim of also making a little money along the way, bit others want a dedicated investment property that they may never even visit. Buy-to-let investments are hugely popular in booming tourist hotspots and in cities suffering a short supply of accommodation such as Istanbul, and off-plan buy-to-let investments are offering very encouraging returns and rental yields:

Depending on the area and property in which you choose to invest, growth figures will vary from 25-40%. Average rental yields in key rental locations currently reaches between 5 and 10% depending upon the property.

Taking an average of 25% capital growth, a property purchased at GBP 60,000 with sustained growth over five years will have a market value of GBP 183,105, entailing a huge 305% return on investment.

Recent research shows that by comparison, investments made since 1994 have now yielded the following average returns: Stock market - 18% (gross), Turkish property - 568% (net), pension plans significant loss (net).


Turkish mortgages were agreed in late 2006 and their general introduction is slowly increasing the desirability and pricing levels of Turkish property. Mortgages can also be raised via overseas mortgage brokers, normally to a value of 80% of the property price.

Developer's mortgages are sometimes available to fund around 80% of the purchase price. Charges applicable will vary according to developer and repayments are index linked. Although these deals can sometimes be highly beneficial, it is always advisable to shop around for the best mortgage or other finance arrangement to suit your needs.


Turkey offers some beneficial capital gains tax incentives: if you sell your property after four years, no capital gains tax will be charged. Property sold before the period is over will be charged at the standard rate of income tax (between 15% and 35%), calculated on the difference between the buying and selling price.
Property acquired as a gift or through inheritance is subject to taxes of between 1% and 30% of the valuation. Tax paid in another country on inherited property is deducted from the taxable value of the asset. Inheritance tax is payable over the period of three years and in two installments per year.

Property taxes include:

Initial purchase/transfer tax: normally 1.5% of the declared purchase price
Annual purchase tax: approx. 0.5% of the declared purchase price
Annual community tax: approx. GBP 8
Government tax: approx. GBP 100

Stamp duty: depends upon the value of the document and is charged from 0.15% to 0.75%.

Value added tax (VAT) was introduced in Turkey in 1985, the implementation of which is similar to that of other European Union countries. VAT rate in Turkey is generally 18% with a few exceptions.

Tax on rental income: Net rental income is taxed as ordinary taxable income. However, if the net rental income from property let out as a residence does not exceed YTL2,200 (€1,095), the said income is not subject to a declaration and the income is not liable for VAT.

Withholding tax: levied on rent payments for non-residents who only earn rental income in Turkey. The taxpayer would not have to file a tax return on income from his Turkish property.

Property tax: Residential premises and land are taxed at 0.1% of their value. This tax rate is doubled if the property is in a metropolitan area.

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