World Map
Global Property Guide Logo

Financial Information for the Residential Property Buyer

Pacific Africa Latin America Asia Middle East Caribbean Europe North America


Turkey: collapsing currency, booming house prices

Last Updated: September 22, 2015

Turkey’s residential property market is now one of Europe’s best performers, despite modest economic growth. During the year to end-Q2 2015, Turkey's nationwide house price index surged 18.96% (10.95% inflation-adjusted), according to the Central Bank of the Republic of Turkey (CBRT). During the latest quarter (Q2 2015), house prices rose 5.08% (3.35% inflation-adjusted).
  • In Istanbul, Turkey’s largest city, house prices skyrocketed 27.6% (19% inflation-adjusted) during the year to end-Q2 2015
  • In Ankara, the capital, house prices rose by 12.2% (4.6% inflation-adjusted)
  • In Izmir, the country’s third largest city, house prices rose by 15.9% (8.1% inflation-adjusted)

Prices of new homes are also rising at double-digit rates, though opinions differ about how much.

According to CBRT, prices for newly-built houses soared 17.4% (9.5% inflation-adjusted) during the year to Q2 2015. Istanbul recorded the biggest annual increase of 25.6% (17.1% inflation-adjusted), followed by Izmir, 16.6% (8.7% inflation-adjusted); and Ankara, 14.2% (6.5% inflation-adjusted).

On the other hand, the Gyoder New Home Price Index from REIDIN showed new house prices rising by only 6.87% during the year to July 2015.

Property prices in Turkey are expected to continue rising during the remainder of 2015, according to some local property experts.

From 2007 to 2011, house prices in Turkey fell by 2% (-29% inflation-adjusted), due to economic growth slowing sharply to 0.7% in 2008, after GDP growth during 2002-2007 of 6.8% annually. Existing house prices plunged 22.45% in 2008 (-14.65% inflation-adjusted). When adjusted for inflation, house prices dropped 2.82% in 2009, by 3.54% in 2010 and by 2.39% in 2011.

Since then, home prices have risen continuously.

However, this is taking place against the background of a collapsing currency, dissatisfaction with the government, chaos on Turkey's doorstep in Syria and Kurdish Iraq, and rising internal tensions. On the other hand, Turkey’s economy grew by 3.8% during the year to Q2 2015, up from 2.5% the previous quarter - its strongest growth for six quarters, according to the Turkish Statistical Institute (TurkStat).

Foreign individuals can freely buy up to 10% of property and land in officially zoned areas which includes cities, towns and resorts. Foreigners cannot buy properties inside and near military, strategic and security zones and foreigners must secure a clearance from the Aegean Army Command. According to the ATSO, it takes three to six months to receive an answer from the military regarding the clearance.
Rental Yields Last Updated: September 22, 2015

Unattractive yields in Istanbul, Turkey

Istanbul is less expensive this year for almost all foreign buyers, due to the dramatic recent decline in the Turkish New Lira. However the bad news is that over the past three years, gross rental yields for apartments have fallen significantly, due no doubt to the pressure on the Turkish economy.

Apartments in the marvellously attractive Besiktas district are (of course) somewhat more expensive than elsewhere in Istanbul, with prices of just above €3,600 per square metre for 120 square metre (sq. m.) apartments. Lucky are those that live in this area of palaces and large houses, looking out onto the Bosporus!

A 120 square metre apartment in Besiktas now yields a return of around 3.1%, versus 6.6% two years ago. Yields fall off significantly at the higher sizes, which are much more expensive to buy per square metre.

Bakirkoy is a mixed district, and has a large range of houses and apartments and areas. Prices for small apartments here are as high as in Besiktas. Gross rental yields are around 3.0% on 120 square metre apartments – again significantly lower than three years ago.

True, better returns can be had in the noisier Beyoglu which is a more ‘work-oriented’ district. But here too yields have fallen far since we last surveyed it, especially for larger apartments. Yields are down to 4.1% to 5.2%, from 5% to 8.7% three years ago.

Kadikoy on the Anatolian side of the Bosporus is another very mixed district, buzzing with life and students, largely residential. As is to be expected, prices of residential apartments here have a wide range. This year we found yields in this district to be the same as last year, 120 square metre apartments here can return 4.3%.  Smaller apartments here have reasonable yields of 5.4%

The beautiful Sariyer district is expensive in its upper reaches, with residential property prices reaching €3,900 per square metre, again down significantly on recent highs.. But smaller apartments are good value. Yields are again down very significantly, to around 2.4% on a 120 square metre apartment.

The varied Sisli district has apartments mostly over €2,700 per square metre, and yields of around 4.0% on 120 square metre apartments.

Round trip transaction costs are reasonable in Turkey.  See our  Poland transaction costs analysis and our Turkey transaction costs compared to other countries.

Read Rental Yields »

Taxes and Costs Last Updated: September 22, 2015

Rental income tax is high in Turkey

Rental Income: Net rental income is taxed at progressive rates, from 15% to 35%.

Capital Gains: Capital gains from sale of real estate are tax-exempt provided that the holding period is longer than five years (four years if the property was acquired before 01 January 2007). For properties held less than five years (four years if the property was acquired before 01 January 2008), normal income tax rates apply.

Inheritance: Inheritance tax is imposed on the value of the inheritance at progressive rates, from 1% to 10%.

Residents: Residents are taxed on their worldwide income at progressive rates, from 15% to 35%.

Read Taxes and Costs »

Buying Guide Last Updated: September 22, 2015

Total transaction costs are low in Turkey

Total transaction costs are low in Turkey. The buyer pays for all transaction costs, which are around 8% to 11%of the property value.

Read Buying Guide »

Landlord and Tenant Last Updated: September 22, 2015

Turkish rental market generally favours tenants

Turkish laws are pro-tenant

Rents: Rents may be freely agreed at the beginning of rental contracts. There is no other form of rent control in Turkey.

Tenant Security:The parties of the lease may specify any duration period they wish. The lease is automatically extended for one more year, unless the landlord informs the tenant in writing at least fifteen days before the expiration date of the lease that it cannot be renewed.

Read Landlord and Tenant »

ECONOMIC GROWTH Last Updated: September 22, 2015

Modest economic growth, plunging lira

Turkey gdp inflationTurkey has experienced robust economic growth since, averaging 6.8% per year from 2002 to 2007. However, the global financial meltdown caused the economy to contract by 4.8% in 2009.  GDP growth rebounded to 9.2% in 2010, and 8.8% in 2011, but slowed sharply to 2.1% in 2012, and 4.1% in 2013, mainly due to the adverse impact of the eurozone debt crisis. In 2014, the economy grew by just 2.9%, partly caused by the falling exports to the country's main trading markets of Europe and the Middle East.

Turkey’s economy grew by 3.8% in Q2 2015 from the same period last year, up from a revised 2.5% growth in the previous quarter and the strongest growth in six quarters, based on figures released by Turkish Statistical Institute (TurkStat).

Despite this, Turkey’s economy is projected to grow between 2% and 2.5% this year, falling far short of a government target of 4%, after the recent election failed to produce a single-party government, according to government officials. An early election is scheduled in November 1, 2015, after coalition negotiations between the ruling AKP and the opposition proved unsuccessful.

As a result, the Turkish lira hit record low recently. In August 2015, the Turkish lira depreciated against the US dollar by almost 22% from the start of the year. The lira is now considered as the third-worst performing currency in emerging markets this year. As of September 12, 2015, the exchange rate stood at about TRY3.05 = US$1.

In June 2015, the annual inflation rate eased to 7.2%, from 8.09% in the previous month and the lowest level since 2013. However, this was still above the central bank’s official target of 5%.

In the first four months of 2015, the budget deficit stood at TRY4.1 billion (US$1.6 billion), slightly lower than the TRY4.2 billion deficit recorded in the same period last year, according to Finance Minister Mehmet Şimşek.

Budget revenues increased 12.9% y-o-y to TRY156.2 billion (US$60.2 billion) during the first four months of 2015, while expenditures also rose by 12.3% y-o-y to TRY160.2 billion (US$61.74 billion).

The Turkish lira hit record low in August 2015, having depreciated against the US dollar by almost 22% from the start of the year. The lira is the emerging world's third-worst performing currency this year. As of September 12, 2015, the exchange rate stood at about TRY3.05 = US$1.

In May 2015, Turkey’s unemployment rate stood at 9.3%, down from 9.6% in the previous month but up from 8.8% a year earlier, according to the TurkStat. Overall unemployment rate was expected at 9.5% this year, based on government forecasts.

There were about 2.79 million unemployed people in the country in May 2015. Over the same period, the labour force participation rate improved to 51.7%, from 51.1% in April 2015 and 51.2% in the previous year.

Turkey has a mixed flavor of Islamic culture and Europe’s ancient and medieval civilization, recently rendered more mixed by the large numbers of scantily-clad North Europeans on its beaches.

Political uncertainty follows inconclusive election
In the parliamentary elections on June 7, 2015 the Justice and Development Party (AKP) lost its majority, after 13 years in power.

In its early years, Turkey’s AKP government was seen internationally as the Islamic equivalent of Europe’s Christian Democratic parties, i.e., a force for moderation and modernity.  The AKP was credited with bringing economic growth and political stability to Turkey. EU membership was one of the government’s top priorities. In September 2010 it won public approval for its plans to amend the constitution, partly to meet the requirements for EU membership, but above all to reduce further the power of the military.

However in recent years President Recep Tayyip Erdoğan has become increasingly authoritarian. Many journalists are in prison, violence against demonstrators is common, a bizarre purge of the military and of those associated with the Gülen movement has undermined judicial independence, and Erdoğan himself has been implicated in a wide-ranging corruption scandal.

A snap election will be held on November 1, 2015 after recent coalition negotiations between the governing AKP and the opposition broke down. Foreign investors have fled Turkish assets since the inconclusive general election in June, and some investors believe that an early election could trigger a further selloff in Turkish assets.

Title: Property in Turkey | Turkish Real Estate Investment

Description: A look at real estate investment in Turkey from the perspective of property income, taxes and Turkish investment prospects

Keywords: global property guide, property guide, global property, Turkey, rental yields, overseas property, property markets, property investments