Turkey

When it comes to buying a holiday home or investment property in the Mediterranean, most people tend to think of Spain or Italy. But Turkey, with its stunning scenery and wealth of antiquities, is fast emerging as a new property hot spot. Straddling Europe and Asia, Turkey is blessed with some of the best coastline in Europe, especially in the country's southwestern corner where the Mediterranean and Aegean seas meet.

With Turkey expected to join the European Union within the next decade, property experts say those who get in early stand to see a substantial return on their investment.

The combination of rapidly rising house prices and Turkish property market reforms has made the country an increasingly popular destination for international investors. Five years ago the government passed legislation making it possible for non-Turkish citizens to buy property. Since then, foreigners have spent more than $7.2 billion on an estimated 30,000 homes, according to the Turkish government. Over the last year alone property sales to foreigners soared by 59% to $2.9 billion.

Moreover, recent changes in legislation have also created the country's first ever mortgage market. As a result, it is now possible to get a mortgage at interest rates that are roughly 50% less than the traditional home loans buyers used in the past. "Now that the government has made it easier for foreigners to buy, demand is soaring," says Ahmet Rauf Saatci, chief executive of real estate agency in Istanbul.

Bright Spots
The sunny Mediterranean climate is only a small part of Turkey's attraction. For starters, property prices are on average 30% to 50% less than those found in more well-trodden hotspots such as the Spanish, French, and Italian coasts. Property experts compare the country to the Spanish property market in the 1970s. And London-based international real estate agency Knight Frank predicts property prices will increase by 12.5% in 2007.

Not only is it cheaper to buy, it is also much cheaper to live. Economists reckon that the cost of living is between 40% and 60% less than in continental Europe. And according to the Organization for Economic Cooperation and Development, Turkey is the fourth least expensive place to live in a recent survey of 30 member countries.

The vast majority of international buyers are focusing mainly on coastal resort towns. Towns such as Bodrum, Marmaris, and Fethiye, all long-popular with vacationing Turks and Europeans alike, have experienced a development boom. Over the last five years, numerous modern apartment complexes and gated private communities have sprung up to cater to demand.

Good Returns
Turkish real estate company Seaside Properties Turkey exclusively markets its portfolio of modern villas and apartments to Europeans. Since ownership laws for foreigners have been liberalized, interest in investment properties in the Bodrum Peninsula has accelerated, according to Seaside Properties Turkey

Those who have bought properties in Turkey are already seeing good returns.

Over the last year, prices in coastal areas have appreciated between 30% and 50%. New, modern, gated developments with pools and other amenities such as tennis courts are in high demand. Take the seaside resort town of Antalya. Fifteen months ago, Umit Sutoglu, a real estate agent with Turyap Lara in Antalya, recalls how one of his clients bought two three-bedroom homes in Antalya for $112,000 each. Within one year, he sold one of the homes for $272,000, pocketing well over 100% profit on the deal, Sutoglu says.

Returns in Turkey's big cities, such as Istanbul, Ankara, and Izmir, are more conservative but still attractive, averaging 10% to 15% a year. Turkey's biggest and most expensive city, Istanbul, offers yields of around 9%, says Century 21's Saatci. "But in Istanbul's new suburbs such as Beylikduzu, Cekmekoy, and Umraniye, returns can climb to 20% or more." He says foreign buyers are increasingly heading to these newly developed suburbs to buy land and build themselves.

Straightforward Sale
The buying process is straightforward. There are no restrictions for Americans or European Union citizens on buying property in Turkey. Most experts recommend consulting a local solicitor to handle the conveyancing and contracts. Typically buyers can expect to pay 25% of the purchase price as down payment. Additionally, purchasers need to factor in taxes—which run 0.3% for houses 150 square meters and less—plus real estate agent commissions of around 5% to 10%, and legal fees of approximately 10% of the purchase price, says real estate agent from Lara.

If you are buying the property to rent, expect to pay 20% tax on the rental income to the Turkish government. If you hold the property for more than four years, you will be exempt from capital gains. But if you decide to sell before then, you will pay 20% capital gains tax locally. Sounds like it's time to board a big bird to Turkey.

Turkey

Just as Turkey looks as if it is shaping up to become the next major holiday-home and investment destination, its government has stopped title deeds being issued to foreigners.


Safe as houses: Bodrum Castle overlooks the lively old town. The peninsula is popular with British and Turkish buyers alike
The country did it for six months in 2005, too, in an attempt to prevent large tracts of rural land being bought up. The latest ban - announced in April and awaiting ratification in parliament - has a similar purpose, limiting foreign ownership to 10 per cent of the land in any town.

Agents selling in Turkey expect the restriction to be lifted soon. "I don't see it as a problem, as you could never expect to receive your title deeds within three months anyway," says Julian Walker from Turkish property specialist Spot Blue. "For anyone buying now, the suspension will have ended by the time they reach completion."

Even 10 per cent foreign ownership of land is a high figure that is unlikely to ever be met, Walker points out. "Even in Spain, 95 per cent of sales are to the domestic market. In Turkey, there are 77,000 foreign property owners out of a population of 77 million, which is 0.1 per cent, so 10 per cent is light years away," he says.

"You have to remember Turkey is a poor country, 20 years behind the West in its property market, laws and business practice. And even though finance is available, it is also still typically a cash market."

advertisementApart from this blip, Turkey's property market is proving resilient, with prices expected to rise by 10-15 per cent this year, says Knight Frank.

The currency exchange company Moneycorp reports that British interest in Turkish property has trebled in the past year. A NatWest survey of mortgage lenders predicts that Turkey - where 22,650 Brits own property - will be the third most popular

destination for UK buyers in the next three years, with most sticking to the area between Kusadasi on the Aegean coast and Alanya on the Med.

In its attempts to double tourist numbers to 10 million by 2010, the Turkish government is investing in infrastructure and attractions, including new golf courses in Dalaman and Belek.

It is also encouraging new air routes and airport expansion. EasyJet now flies to Dalaman and Istanbul, BA to Antalya. A new international airport at Edremit will open up areas around Ayvalik, north of Izmir - until now, despite good beaches, great windsurfing and attractive property, the preserve of Turkish buyers.

Beyond its appeal as a value-for-money location for holiday homes - outside pricier Istanbul or Bodrum, the average two-bedroom apartment costs £35,000-£90,000 - Turkey is also drawing investors to Istanbul, where new development is taking place on both sides of the Bosphorus.

Prices average about £700-£900 per square metre, with studios from £40,000 in developments such as Life Studio near Ataturk international airport (through The Right Move Abroad), or Astrum Towers, six miles from the airport, which agent Regnum predicts will see annual growth of 30 per cent.

So, this Christmas - or whenever the restrictions ease - why not vote for Turkey?

BODRUM FAR FROM HUMDRUM

Lively resorts, leisure facilities and low-priced newbuild properties make the Bodrum peninsula one of Turkey's best-known areas for British visitors, while quieter spots such as Yalikavak and Gumusluk appeal to wealthy Turkish property buyers wanting £1m-plus villas.

"Bodrum is one of the most popular coastal regions," says Jane Griffiths, managing director of Regnum, "and Turkey's appeal is widening to take in growing numbers of Eastern European holidaymakers as well as British. Small apartments can achieve rents of £300 a week."