23617436-Turkey-Overview

27th November 2006

Demand outstrips supply by 500,000 units per year

Mortgages shortly available

TURKEY

No foreign property ownership restrictions

One of the strongest European property

markets 2007

Turkey 2 Ready2invest

Turkey

TURKEY AT A GLANCE

Area: 780,580 km2

Climate: Temperate

Time zone: GMT/UTC + 2

Population: Over 70 million

Language: Turkish (offi cial)

Capital city: Ankara

Political system: Republican parliamentary

democracy

Currency: New Turkish Lira (YTL)

International airports: 7 (including Istanbul)

Date of EU accession: Expected in 2015

Getting There

European airlines fl y directly year round into Turkey. Cheap fl ight operators EasyJet now run a daily fl ight to Istanbul from the UK, with prices starting from just £30.

Approximate fl ight times to Istanbul:

from London 31/2 hrsfrom Dubai 2 hrsfrom Moscow 31/2 hrs

Black Sea

Mediterranean

Bulgaria

Syria Iraq

Armenia

Georgia

Greece

Cyprus

• Istan

bul

• Ankara

Property prices 40-50% less than in Eastern Europe

• Bodrum

• Marm

aris

• Antal

ya

Finike

•


STRONG ECONOMIC GROWTHTurkey is the 16th largest economy in the world with an expected GDP of $382 billion, which will put the Turkish economy ahead of Belgium, Switzerland and Sweden in 2006. Bear in mind that 45% of the Turkish economy is unrecorded too, meaning it is actually much larger than publicly stated. Turkey is also among the top 7 emerging markets, with one of the most open, dynamic and internationally integrated economies in the region. Indeed, some large clients of PriceWaterhouseCoopers regard Turkey as a faster-growing market than China, India and the rest of the so-called E7 countries. As economic growth translates into increased spending power, there will be a strong upward pressure on property prices.

ECONOMIC AND POLITICAL STABILITYThe economic transformation in Turkey has been dramatic, especially the lowering of inflation, and the country is now more stable economically and politically than ever before. Turkey has been a member of United Nations since 1945 and a member of NATO since 1952. It has also been a secular state since 1923 where religion and the state is separate.

SERIOUS HOUSING SHORTAGEA rapidly growing, young population coupled with swift urbanisation has led to a severe housing shortage in Turkey. According to a recent study, the country needs more than 5 million new houses by 2010. Furthermore, inefficient financial institutions have historically hindered developer’s ability to secure financing, compounding the housing deficit.

SET TO JOIN THE EU OR CLOSELY CONVERGE BY 2015Turkey has always had very close ties with the EU. In 1996, a Customs Union came into effect between Turkey and the EU, creating the closest economic and political relationship between the EU and any non-member country. Last year, Turkey met all of the Copenhagen Criteria, the political criteria which are the pre-requisites for starting the full EU membership negotiations, and this has already begun to impact property prices.

INTRODUCTION OF A MORTGAGE SYSTEMDraft mortgage law will be ratified in 2006, stimulating demand for domestic housing and driving house prices upwards. Right now, property has to be bought with cash or

bank loans at really high interest rates. When new legislation is ratified by the Turkish Parliament in 3 months, the local market is set to soar. The same law will allow foreigners to secure mortgages, which will further boost property prices in Turkey.

LIBERALISATION OF FOREIGN PROPERTY OWNERSHIP LAWSNew legislation was ratified in December 2005 permitting foreigners to own Turkish property. Now, 100% foreign ownership is permitted, as well as 100% repatriation of profits and dividends, creating a favourable climate for investing in Turkish residential property.

BOOMING PROPERTY MARKETDue to the arrival of mortgages and the growing interest in foreign property investors the dynamics of Turkey’s property market could be compared to those of Spain 20 or more years ago (only better), and the country could well emulate this growth and development pattern. In a study carried out by MasterCard in December 2000, Turkish nationals were asked what they would do if they had an additional $20,000. Thirty-five per cent said they would buy a house. (For respondents in the lower to middle income brackets, this figure was 50%.)

Why Invest in Turkey?


MASSIVE FOREIGN INVESTMENTWhen Turkey began the process towards EU accession last year, it immediately led to a surge in international and foreign direct investment, particularly into Istanbul. Foreign investment pouring into the country is currently estimated at $10 billion dollars per year.

STRONG AND GROWING LOCAL MARKETHigh population growth and fast urbanization are the most important factors triggering housing demand in Turkey. With a local population of more than 70 million, Turkey is among the world’s most populated top 20 countries. The country’s population growth rate is 2% per year, well above the world average. Surprisingly, 70% of the population is younger than 35, which indicates a strong and growing local market.

LARGE EXPATRIATE COMMUNITYThere are about 3.4 million expatriate Turkish citizens, 90.5% of whom live in western European countries. It is estimated that more than 2 million Turks live in Germany alone, of whom more than 47,000 have established small- and medium-sized enterprises with a total annual turnover of about $25 billion. Much of this money finds its way back to Turkey, where it can be used to buy property.

Why Invest in Turkey?

Did you know...

• The only city in the world located on two continents is Istanbul, which was the capital of three great empires (Roman, Byzantine and Ottoman) for more than 1,700 years.

• Two of the seven ancient wonders of the world, the Temple of Artemis and the Mausoleum at Halicarnassus, are located in Turkey.

• Julius Caesar proclaimed his celebrated words, “Veni, Vidi, Vici” (“I came, I saw, I conquered”) in Turkey when he defeated the Pontus, a formidable kingdom in the Black Sea region of Turkey.

• Turks introduced coffee to Europe and the tulip to the Dutch.

• St. Nicholas, who became popular as Santa Claus, was born in Demre on Turkey’s Mediterranean Coast.

• The Famous Trojan Wars took place in western Turkey, which is marked with a wooden statue of the Trojan Horse today.

• Anatolia in Turkey is the location of the first known beauty contest – judged by Paris, with Aphrodite, Hera and Athena as leading participants.

• Turkey provides 70% of the world’s hazelnuts; the nut in your chocolate bar is most probably grown in Turkey.

Ten Reasons Why We Love Turkey

continued..

Turkey’s housing shortage is estimated to be 500,000 units per annum (McKinsey Global Insitute) so demand for new homes is expected to remain very strong for some years.


Turkey’s Political Foundation

During the last year you may have heard a lot of news about how Turkey was set to start negotiations to enter to EU. While these events have grabbed the headlines, the story to report about Turkey has so much more depth and vitality to it than one political process. This is about the re-emergence of one of the old centres of global power.

In 1923, the great Turkish Attaturk established the modern and secular state of Turkey. He was determined, and has been successful, in establishing a nation populated primarily by Muslims but where religion and the state are clearly separated. This has enabled Turkey to develop modern institutions. Its powerful military is constitutionally empowered to ensure that the secular nature of the state is not challenged.

Historically, Turkey’s institutions have not always been democratic and in the past there were human rights problems. Since 1980, however, Turkey has been moving increasingly towards a Western democratic profile. The Rubicon was crossed in December 2005 when Turkey was deemed to have met the “Copenhagen Criteria”, enabling the country to open talks with the EU. This event in itself is confirmation that Turkey’s democracy is significantly entrenched.

Today, the government is led by Recep Erdogan, whose party, The Justice and Development Party, combines economic liberalism with Islamic social values. Recep’s programme consists of driving a programme of economic liberalisation, cleaning up the country’s human rights record, and getting Turkey into talks with the EU. Specifically, the Erdogan government is committed to:

• running a fiscally responsibly budget • reinventing government, enabling private

businesses to thrive• ongoing privatisation• working in collaboration with the IMF

and the World Bank • implementing all necessary laws in line

with EU requirements

While there is much debate as to whether EU entry is good for Turkey and Europe, given that, at best, entry is ten years away, it is the changes being wrought now that are important. In order for Turkey to entertain any thoughts of starting negotiations for entry, it had to meet what are called the “Copenhagen Criteria”. These are the political pre-requisites for starting negotiations. That these Criteria have been met and Turkey began talks on 3rd October 2005 should give investors even more confidence in this burgeoning economy.


Tax

CAPITAL GAINS TAXCapital gains tax in Turkey, whether for an individual or a company, is treated as part of general income tax. Personal income tax varies from 15-40%. Basic corporate income tax levied on business profits is 30% in Turkey, but there are plans for 2006 to reduce this to 20%.

Currently, if you hold on to a property for 4 or more years after the date of purchase, you are not required to pay income tax on capital gains at all.

VALUE ADDED TAX (VAT)VAT (KDV in Turkish) fall within 2 price brackets. 1% is due on property less than 149m2, 18% due on property of 150m2 or over.

STAMP TAXStamp duty applies to a wide range of documents, including contracts, notes payable, capital contributions and letters of guarantee. Stamp duty is levied as a percentage of the value of the document at rates ranging from 0.15% to 0.75%. Stamp tax is payable by the parties who sign a document. Each and every signed copy of the agreement is separately subject to stamp tax.

PROPERTY TAXProperty taxes are paid each year on the tax values of land and buildings at rates varying from 0.1% to 0.6%. In the case of the sale of property, a 1.5% levy is paid on the sales value by both the buyer and the seller. The rates are applied twice for property located in the Metropolitan Municipality areas.

Buildings and land owned in Turkey are subject to real estate tax at the following rates:• Residences: 0.1% • Other buildings: 0.2% • Land: 0.1%

DOUBLE TAXATION TREATIESTurkey has signed bilateral tax agreements with 60 countries, including the UK, which means you will not be required to pay income tax on capital gains twice.

UK TAX SPECIALISTIf you would like to speak with a UK accountant with regards to your tax position, we recommend Drew Hazell at Taylor Bradshaw and find him highly knowledgeable. His number is 01799 525 407.

1. Sarah Vaughan, “Turkey has all the Trimmings”, available at www.channel4.com/4homes/buyingabroad/countryguides/guide_turkey_06.html 2. See All About Turkey at http://www.allaboutturkey.com/tax.htm. Primary source reports from Foreign Economic Relations Board (DEIK) and Price Waterhouse Coopers.

“The additional costs associated with a property purchase such as legal fees, notary charges and property tax work out to be less than half of the Spanish equivalent at 5% of purchase price versus 10% of purchase price.” 1

Channel 4

As with all tax systems, the rules in Turkey are complex and you are strongly advised to seek professional advice from a tax specialist. However, here is a guide as to what you can expect.2


Istanbul

Ranked as the top real estate development market by Urban Land Institute and

Price Waterhouse Coopers

Turkey’s No.1 HotspotAll eyes are on the Turkish city of Istanbul in 2006, after property investors reaped returns of up to 85% last year. There is now a feeling of anticipation and excitement in the air. Turyap, one of Turkey’s largest real estate firms, estimates residential property prices in Istanbul will rise 80–120% this year, as foreign investment, the start of long-delayed talks to join the EU and the launch of mortgages spurs the market.


UP TO 60% CHEAPER THAN EASTERN EUROPEAccording to Ferhunde Ozguler, head of international relations at Turyap, property prices in Istanbul are still 50–60% less than the Eastern European average and 80–90% less than the general European average.

SOARING POPULATIONWith its area of 5,712 km2, Istanbul covers only 0.7% of Turkey, but it holds more than 15% of the population within its geographic boundaries. Because of continuous immigration from the rural areas, the city grows rapidly, by about half a million persons per annum. Each year, 1,000 new streets are constructed within the city, and brand new settlements rise on the east-west axis. The population of the city doubles every 12 years, pushing up demand for residential property.

MASSIVE HOUSING DEFICITIstanbul accounts for 10% of the housing gap in Turkey. There is currently a deficit of 500,000 units in Turkey, with the demand for newly built buildings in accordance with the new earthquake building regulations fuelling the property market even further.

MAGNIFICENT HISTORIC CITYHistorically at the crossroads of Europe and Asia, Istanbul is a truly magnificent city. The mighty Bosporus Sea flows through the city bringing a vital trade link, with ships going through 24 hours a day. It also brings drama and beauty to an already buzzing cosmopolitan city. Think Sydney harbour meets Rome. In fact, Istanbul was formerly called Constantinople and was once the capital of the Eastern Roman Empire.

STRATEGIC LOCATIONSituated on the connecting point between the two continents, Istanbul is strategically placed in terms of global interactions. The city has been dubbed the capital of “Euro-Asia”, and acts as an international gateway for several regions. The development in Tasdelen is ideally located only 20 minutes’ drive from central Istanbul, in one of the safest areas in terms of earthquake risk and only 2 kilometres from Yenidogan, selected by Bill Gates as the new silicon valley of Turkey.

KEY ECONOMIC PLAYERIstanbul accounts for around 23% of Turkey’s total GDP. The city’s rapid pace of urbanization, its population density, and its centrality to the Turkish economy may well make it the most important metropolis in the Middle East and Eastern Europe.

THE COMMERCIAL AND FINANCIAL CENTRE OF TURKEYThroughout the ages, Istanbul has been a centre of economic activity, largely due to its geographical location at the meeting point of Asia and Europe, the Black Sea and the Mediterranean. The city serves as a junction between land and sea trade routes: 36% of the total exports and 40% of the total imports of Turkey are made via Istanbul.

MASSIVE FOREIGN INVESTMENTSince Turkey began the road to EU accession in 2005, Istanbul has been flooded with foreign investment. UAE-based Dubai Holding plans to build a pair of twisting skyscrapers in Istanbul for shops, offices, flats and hotels in a $500 million investment. IKEA opened a store in Istanbul in 2005, and 2006 will bring Harvey Nichols. and a new Soho House Hotel. Conde Naste even designated Istanbul as their top tourist destination for 2006. A record number of businesses are now establishing bases in Istanbul, and all require professional staff who in turn require decent accommodation to buy and let. This is fuelling demand, inflating rental yields and pushing up residential and office property prices.

INCREASING AFFLUENCEHalf of the dominating 500 industrial enterprises of Turkey have their factories and business headquarters in Istanbul. Not only is Istanbul the country’s centre of finance and culture, it is also becoming a regional centre for global companies such as Philip Morris, J.P. Morgan-Chase, Coca Cola, General Electric, Proctor & Gamble and Microsoft. Buoyed by the EU talks, foreign companies are pouring into Istanbul, creating well-paid jobs and bringing increasing affluence to the city. As Turkey’s large, young population gets richer, there will continue to be a strong upward pressure on property prices.

Why Istanbul?


Finike‘Turkey is expected to become one of the best performing markets for property in

Europe by 2007’ - Amberlamb


TURKEY’S UNDISCOVERED HOTSPOTLocated between the international resort of Antalya to the east and the established tourist hotspot of Bodrum to the west, Finike has remained untouched by mass tourism. The neighbouring town of Kemer was in a similar situation two years ago but it has experienced increasing demand for property and 25% capital growth over the last two years. With the introduction of a new coastal road, this rapid growth of nearby regions, along with the growing interest of property developers and investors towards the southern coast, is set to reach Finike next.

IMPROVING INFRASTRUCTURE Finike is now very accessible via road, air and sea. There are frequent and cheap flights from London airports to Antalya, and this airport is just over an hour’s drive from Finike along the fast, new coastal road. The marina in Finike is the main point of entry for sailors from the southern countries1 and other ports of the south coast, and has a capacity for 350 yachts2. Planning permission has been granted for a few 5-star hotels along the frontline to further the appeal of the town but to retain the authenticity of the area, tight planning restrictions are in place.

STEADY CAPITAL GROWTHDue to the relaxation of foreign property ownership laws earlier this year in Turkey, the country as a whole is predicted to become one of Europe’s strongest property markets in 2007. It has been estimated by Amberlamb that next year will provide some 12% capital appreciation3 across the country as a whole. In an emerging hotspot such as Finike this figure is likely to be considerably higher.

CHANGING MORTGAGE LEGISLATIONDraft mortgage law will be ratified in 2006, stimulating demand for domestic housing and driving house prices upwards. At the moment, property in Turkey has to be bought with either cash or bank loans at very high interest rates. When the new legislation is ratified by the Turkish Parliament, the local market is set to soar. The same law will allow foreigners to secure mortgages, which will further boost property prices in Turkey.

GROWING LOCAL MARKETMany wealthy Turks own holiday homes in Finike. Furthermore, when mortgages become available to individual homebuyers in Turkey, the middle classes can also afford second homes. As a growing local market ultimately assists in an onward sale of property, this is great news for a property investor.

LONG SEASONThere are on average over 300 days of sunshine in the Finike region annually and the season is as long as that of Northern Cyprus. Temperatures rise up to the mid-thirties in the heart of the summer, and even in the winter it is very rarely cold. The area has the mildest winter climate, the highest seawater temperature and the longest summer season in all of Turkey. All this ensures a lengthened rental season, helping boost rental yields.

LOCATION, LOCATION, LOCATIONNear Mount Olympos of Antalya, surrounded by lush, green fruit orchards and fronted by the glistening Mediterranean Sea, is Finike - a small fishing town with plenty to speak for it. The sandy beaches stretch 22km along the coast to the east of Finike, towards Antalya, and to the west rugged cliffs and authentic nature dominate the landscape. Around the town there are also various cultural-historically valuable destinations like the sunken city of Kekova and the Lycian town of Limyra.

PLENTY TO DOFinike area is a place for activities. The picturesque local marina provides great facilities for yachting, fishing and all types of water sports. Other sporting attractions include the golf clubs near Antalya4 and the option of skiing in the Saklikent ski resort5, which increases the appeal for the area in the winter. At certain times of the year, it is possible to ski in the morning and swim in the sea in the afternoon.

Why Finike?

1. http://www.blueflag.org/blueflag/2006/Turkey/Antalya/SeturFinikeMarina

2. http://www.worldwide-yacht-charter.com/mediterranean/yacht-charter-antalya.php3

3. http://www.londonstockexchange.com/en-gb/pricesnews/investnews/article.htm?ArticleID=17912208

4. http://www.gototurkey.co.uk/index.php?submen=13&menu_id=363

5. http://www.saklikent.com.tr/


FAQ

Q) What nationalities can buy in Turkey? A) Turkey has a reciprocal agreement for the purchase

of land and properties with the following countries: Germany, Austria, Switzerland, Belgium, Holland, UK, Ireland, Spain, Italy, Canada, Luxembourg, Norway, Australia, France, Greece, and various other countries.

Q) What documentation will I need?A) Your passport is the only documentation you will

need to purchase a property in Turkey.

Q) Do I need a visa to enter Turkey? A) You will need a visa to enter Turkey and these can

be obtained at Immigration once you arrive. This will cost £10 for a UK citizen and will be valid for 3 months.

Q) How do I bring funds out of Turkey?A) Because of the change in law (Decree 32, August

1989) the Turkish Lira is now convertible so proceeds of the sale of a property can be converted to whatever currency you select and subsequently transferred to the country of your choice.

Q) Can I get a mortgage in Turkey?A) Fidentia, a specialist overseas Mortgage brokers, say

that due a bill being passed in the Turkish courts two months ago which lead to a change in legislation, there is no longer a legal restriction on foreign investors obtaining a mortgage in Turkey. There are already loan products existing, local Turkish finance companies are offering secured loans, this however isn’t regulated and isn’t a recommended route to go down. This change in the law will mean that mortgages will be available as soon as three months, which will have a dramatic effect on the Turkish property market.

Q) Will I have to pay tax or charges when bringing funds into Turkey?

A) There are no government charges for transferring funds, but your bank at home will charge you transfer fees and receiving banks in Turkey normally have a small charge also. There are government tax charges when buying a property and annual property taxes also.

Q) If I sell my property, can I freely transfer my funds out of Turkey?

A) Yes, Turkey has a very liberal investment climate, including free (international) movement of capital, profits, dividends and salaries, free-trade zones and subsidies. Again, small bank charges may apply.

Q) What religion(s) is most established in Turkey? A) 99% of the Turkish population is Muslim. However

due to the nature of the secular state, everyone in Turkey has full freedom of religious belief. In Turkey you will find Catholic, Orthodox, Protestant and Armenian churches, as well as Synagogues, and everyone is free to practice the religion of his choosing.

Q) Are double taxation treaties in place?A) Turkey is a signatory to a treaty for the prevention

of double taxation with 60 countries throughout the world, including the UK.

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