A Place in the Sun
Turkey, Volume 179
31.01.2006
In line with Turkey’s
drive to attract foreign capital and investment, the adoption of a law one month
ago allowing foreigners to buy property in Turkey has received much applause
from local expatriates and would-be holidaymakers. Despite the efforts of the
opposition Republican People’s Party (CHP) and a signature campaign by
nationalists, Turkey’s summer guests can contemplate buying whitewashed
properties along the Aegean and Mediterranean coasts with few
complications.
With an increase in business from abroad expected, Turkey’s
real estate brokers and agents are gearing up for some busy days ahead. Such
expectations are not without foundation. Despite a freeze on the foreign
acquisition of property imposed in July 2005, foreigners continued to link up
with Turkish partners to buy property on their behalf. Even with the freeze in
place, the value of foreign-owned real estate notched a warm $1.4bn between
January and November 2005. Now, with the doors open to 100% foreign ownership,
profit margins are expected to swell for agents and brokers
alike.
Confidence also derives from the limited restrictions foreign
buyers will be facing under the newly adopted legislation. While land purchases
cannot initially exceed 2.5 ha – equivalent to the size of five football fields
- acquisitions can in fact be increased to 30 ha, subject to authorisation by
the Council of Ministers. However, there are still some restrictions, with
limitations on the sale of properties deemed to be strategically important or
sensitive for the state.
“We see restrictions in certain areas, including
agriculture, energy, mines, protected habitats and military strategic
locations,” said Kerem Tezcan, a market analyst at the financial services firm
Raymond James.
There is some room for interpretation however as to what
is considered as strategic property for Turkey. Apart from the clear cut case of
Turkey’s military zones, the assessment as to whether a property qualifies as a
nationally sensitive area, and thus subject to restrictions, is left to the
cabinet.
Other conditions under the new law have also drawn attention. To
alleviate concerns over the potential for large portions of Turkish land falling
into foreign hands, the area of properties sold to outsiders cannot exceed 5% of
the territory of any of Turkey’s 81 provinces. This restriction is to be
monitored by the cabinet. In addition, the purchase of land by foreigners will
be subject to the principle of reciprocity. As such, property inherited by
citizens of countries that do not have a reciprocal agreement with Turkey will
have their properties sold and the heirs handed the proceedings.
Rather
inevitably, members of Turkey’s political opposition responded negatively to the
legislation when it was adopted at the end of December, amidst a welter of
claims the government was paving the way for the selling off of the country to
foreigners. The main objection raised was that the articles of the bill approved
by the Justice and Development Party (AKP) dominated parliament differed only
slightly from a previous bill rejected by the Constitutional Court earlier in
2005.
Concerns regarding the size of future acquisitions by foreigners
have been voiced in spite of the restrictions put in place by the
government.
“You [the AKP government] say foreigners will purchase shops
and homes, but then give the cabinet the right to buy pieces of property as
large as 30 ha,” CHP parliamentary deputy Tekirdag Saygun said during the debate
on the legislation.
The question being asked by would-be investors is
whether the new legislation is likely to be changed or amended against the
interests of foreign real estate seekers in the near to medium term.
“As
far as opposition from the CHP is concerned, we have seen the end of the story,”
says Tezcan. ” I do not expect to see any cancellation. There is not much the
opposition can do anymore.”
All this implies that Turkey’s coastal
resorts can expect to see some familiar faces every summer, with the British,
Germans, Greeks and Dutch particularly tempted by Turkish real estate along the
coast. Now, Europe’s sun worshipers can secure their very own place under
Turkey’s rays, but at the cost of property prices bearing the brunt of
international demand.
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