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Everything you need to know is included in our Turkey Property Pack
Are you thinking of investing in property in the land of Ottoman Heritage? Are you thinking about when to take action?
People hold diverse opinions regarding market timing. The Turkish real estate agent you know might advise you that now is the perfect time to buy property, while your childhood friend from Istanbul may suggest exercising more patience before making a decision.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Turkey, we use verifiable facts and concrete data, not just subjective opinions.
We have collected and examined all the official reports and statistics from government websites. Based on this extensive research, we have compiled a complete and reliable database. Here's what we discovered, which can assist you in deciding whether now is the right time to purchase real estate in Turkey.
Enjoy the article!
How is the property market in Turkey currently?
Turkey is currently a highly vulnerable country
Negative
Stability should be the first thing you look at when you want to invest in real estate because it fosters steady rental income and potential capital gains. It is an information you need as a foreigner looking to buy a property in Turkey.
Unfortunately, Turkey does not possess the stability required to be classified as a stable country today. The last Fragile State Index reported for this country is 84, which one of the lowest scores in the world.
Turkey is currently highly vulnerable due to its economic instability, characterized by high inflation rates and a depreciating currency, which have eroded consumer purchasing power and increased the cost of living. Additionally, the country faces geopolitical tensions, particularly with neighboring countries and within NATO, which exacerbate its economic challenges and contribute to political uncertainty.
First check tells us not to invest in this country. Let's look at more data.
Turkey is on track for significant expansion
Positive
Before investing in Real Estate, assess the stability of the country's economy.
In accordance with IMF projections, Turkey is likely to finish 2024 with a growth rate of 3.1%, which affirms the country's positive direction. Regarding 2025, the figure we're looking at is 3.2%.
Besides that, the economy will keep growing since Turkey's economy is expected to increase by 14.7% during the next 5 years, resulting in an average GDP growth rate of 2.9%.
The expected sustainable growth rate in Turkey indicates a stable and growing economy, which can lead to increased property values and rental demand over time. For real estate investors, this means a higher potential for returns on their investments as the market continues to develop.
Nonetheless, GDP growth is not the only metric to look at.
Turkish business owners have faith in the economy's growth prospects
Positive
How do Turks perceive their economy? The GDP forecast is not the sole determinant of their perception. Fortunately, in Turkey there is an official metric that is frequently communicated. We're lucky because this isn't true for every country.
The Business Consumer Index (BCI), which measures business leaders' confidence in the current and future economic conditions, is established using surveys and assessments.
The Central Bank of the Republic of Turkey reports that the Business Confidence Index has reached a value of 5 for Turkey. It can be regarded as a rather neutral score.
Things haven't changed much, as the BCI score was, 12 months ago, at 7.
The current moderate level of business confidence in Turkey alone doesn't provide sufficient information to determine whether it's the right time to invest in property in the country. Before making a decision, we need to consider additional data points.
Turkey is not really issuing more building permits
Neutral
The number of permits given for building houses can be a valuable way to tell if it's a good time to buy property in a country. When more building permits are issued, it reflects a positive stance on the property market's future.
Unfortunately, there aren't more building permits granted in Turkey.
In the previous 12 months, according to Turkish Statistical Institute, the number of building permits issued by the Turkish municipalities rose by 1.7%, from 701,509 to 713,196 units.
Is it a good time to invest in properties then? We need to look at more data.
Remember that there will be a bigger selection of properties available in the domestic market. Then, yes, it's possible that property prices will decrease in Turkey in 2025.
Exploding growth in house prices in Turkey
Negative
Turkey's home prices have increased by 691.2% in 5 years according to Central Bank of the Republic of Turkey.
It means that if you had bought a seaside villa in Bodrum for $625,000 five years ago, then it would now be worth around $4,945,000.
There are several reasons why house prices are soaring in Turkey. One of the leading causes is reckless interest-rate cuts, imposed as a result of the misguided policies of Turkey’s president, Recep Tayyip Erdogan, and a resulting surge in inflation. This has encouraged those Turks with access to sufficient credit to protect their wealth by investing in property. Foreign buyers, especially Russians, have also helped drive up prices in Istanbul and along the Mediterranean riviera.
Prices might be too expensive now to consider a property investment in Turkey.
You can find a more detailed analysis of the real estate prices in our property pack for Turkey.
Everything you need to know is included in our Turkey Property Pack
Turkey's population is growing and getting a lot richer
Positive
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Turkey, the average GDP per capita has changed by 17.2% over the last 5 years. Very few countries have achieved superior results. Furthermore, the Turkish population is growing (+6% in 5 years).
This means that, if you purchase a spacious house in Istanbul and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, the demand for rentals is set to increase in Turkish cities like Istanbul, Ankara, or Izmir in 2025.
Rental yields are interesting in Turkey
Positive
Rental yield is a common tool used to evaluate real estate investments.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Turkey is purchased for 500,000 TRY and generates 30,000 TRY in annual rental income, the rental yield would be 6%.
According to Numbeo, rental properties in Turkey offer gross rental yields ranging from 4.1% and 6.8%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Turkey.
It means that a property will generate a high rental income compared to its purchase price.
As seen before, the supply of real estate will remain the same, and the pool of wealthy tenants will expand. Consequently, rental yields may increase in Turkey in 2025.
Everything you need to know is included in our Turkey Property Pack
In Turkey, inflation is anticipated to be minimal
Neutral
Inflation is the erosion of the value of money.
It's when your usual portion of börek costs 10 Turkish lira instead of 8 Turkish lira a couple of years ago.
If you're considering investing in a property, high inflation can bring you several advantages:
- Property values tend to increase over time, potentially leading to capital appreciation.
- Inflation can result in higher rental rates, increasing the property's cash flow.
- Inflation decreases the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, helping preserve the investment's value.
- Diversifying into real estate provides stability during periods of inflation.
In accordance with IMF projections, over the next 5 years, Turkey will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.
This data shows that Turkey is expected to have near-zero inflation then. Prices won't rise and then your property investment may not appreciate.
Turkey's currency is currently very low
Positive
If you're using a foreign currency to finance your investment, this point is important for you.
The Turkish Lira (TRY) is greatly devalued: the currency is currently 25-29% over the past five years.
As a foreign investor, purchasing property in Turkey while the currency is low could offer significant cost advantages, as the investment would require less capital in terms of foreign currency. This situation may also present an opportunity for potential appreciation in property value if the Turkish lira strengthens in the future, enhancing the return on investment. However, it's crucial to consider the economic and political stability of the region, as well as potential risks such as inflation and regulatory changes, which could impact the long-term value and profitability of the investment.
The Turkish government has made some changes regarding foreign ownership
Positive
Turkey raised the investment threshold for citizenship
In 2024, Turkey increased the minimum real estate investment for citizenship:
- From $250,000 to $400,000, with a 3-year holding requirement.
The residence permit minimum property value is now $200,000
For residence permits, the property must now be worth at least $200,000 in any city. This change took effect in October 2023.
Property valuation has been simplified
No separate valuation report is needed anymore. The title deed price must exceed $200,000 for residence permits and $400,000 for citizenship.
New restrictions apply to property transfers
Properties can't be sold if transferred by a foreign person within the last 3 years, except in work-related cases.
There are updates on the commitment period and cancellations
The 3-year ownership commitment remains, but requests for cancellation before the period ends will now be granted.
Due diligence has been strengthened
Stricter due diligence rules aim to improve transparency and prevent money laundering.
Foreign ownership is restricted in some regions
Certain areas, especially tourist hubs like Istanbul and Antalya, now have restrictions to prevent market saturation.
New tax rules affect property transactions for foreign buyers
Tax reforms have been introduced, impacting how foreign buyers are taxed on property deals.
These changes aim to regulate the market, encourage long-term investment, and discourage speculative buying.
Is it a good time to buy real estate in Turkey then?
Let's wrap things up!
While Turkey's economy is projected to grow by 14.7% over the next five years, making it seem like a promising time to invest in property, the country is currently facing significant vulnerabilities. Political instability, regional tensions, and economic uncertainties can pose risks to property investments. These factors can lead to fluctuations in property values and rental demand, making it a potentially volatile market for investors in 2025.
Despite the expected economic growth, Turkey is not issuing more building permits, which could lead to a shortage of new housing developments. This lack of new construction might drive up property prices due to limited supply, making it more expensive to buy property. For potential buyers, this could mean paying a premium for properties, which might not align with the anticipated returns on investment.
Additionally, the exploding growth in house prices in Turkey could be a double-edged sword. While it might indicate a booming market, it also suggests that prices are becoming increasingly inflated. This could lead to a housing bubble, where prices rise rapidly and then crash, leaving investors with properties worth less than what they paid. Such a scenario could be detrimental to those looking to invest in 2025, as the market might be at its peak.
Even though Turkey's population is growing and becoming wealthier, which could increase demand for rental properties, the rental yields reported by Numbeo range from 4.1% to 6.8%. While these yields are decent, they might not be enough to offset the risks associated with the current vulnerabilities and potential market volatility. Furthermore, while inflation is anticipated to be minimal, the overall economic and political landscape in Turkey could still impact the stability and profitability of property investments in 2025.
We genuinely hope this article has provided you with helpful information.. If you need to know more, you can check our our pack of documents related to the real estate market in Turkey.
-Will real estate prices go up in Turkey?
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.