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With the Lira falling .. Is it time to buy real estate in Turkey?

: 2018-08-18 Modified date : 2019-04-15

With the Lira falling .. Is it time to buy real estate in Turkey?
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Location, location, location... Perhaps if the origin of the traditional triple mantra wasn’t known location, Location, Location, when it’s first appeared in the Washington newspaper in 1952, it would have been thought as it was created specifically for the Turkish real estate sector for the period between in 2012 and 2018, marked by an unprecedented real estate boom in Turkish history. It was not in vain, but it’s planned for the Turkish real estate sector to take the lead in economic growth and become a major source of foreign currency by attracting foreign buyers, it seems to have been very successful in its mission. The sector has accounted for nearly 8.4% of Turkey's GDP over the past decade.

As usual, Turkey was exposed to internal and external crises especially during the Renaissance period, and it was the beginning of Ankara’s assistant to what’s known as the “Arab Spring” which caused anger of some countries in the region opposed to those waves of protest and reform, through the attacks "successive" cities of Turkey, such as Istanbul attacks in 2015, and then the failed coup attempt in 2016, the diplomatic crisis with Moscow after the overthrow of Turkey by a Russian plane in the south of the country, The assassination of the Russian ambassador in Ankara, and probably not the end of the current trade crisis with the United States, but a surprise came among all these crises, as things are required of the collapse or at least negative fluctuation due to crises; the Turkish real estate sector acquires the influx of foreign investment into the sector amounted to almost half of the total FDI in Turkey last year. Of the 10.8 billion dollars represented by the total foreign direct investment flows, which entered the country in 2017, the real estate and construction has acquired $ 4.6 billion of them, which are levels not previously assigned by the Turkish economy. Foreign buyers' purchases of real estate doubled in 2017 from 2016 to $ 1.7 billion.

Coincided boom with the structural changes to the laws of property ownership to foreigners. In 2012, the government abolish the law was serving the requirement of "reciprocity" to attract more foreign buyers, in the same year allowed the citizens of 183 countries to purchase property Turkish home, and land foreign ownership wasn’t that easy, allowing the ownership of land with an area of about 150 acres, without obtaining special permission, after the legal area was limited to only 6 acres. The effect of these measures was that foreigners took over Turkey to own real estate, and Arabs accounted for the biggest share of purchases, with sales rising fivefold between 2012 and 2015.

The crisis

The economy is now ranked 18th among the world's economies, with a domestic output exceeding $ 900 billion, with the real estate sector accounting for one-fifth of the total. It is facing a new crisis and a significant drop in its local currency. The lira has lost about 50% of its value in the last 12 months, Such as the current account deficit coupled with high levels of debt in the private sector and large foreign financing for the banking sector. The inflation rate was 15.9% in July of 2018, more than five times the average for the rich countries. And government loan in foreign currency increased significantly, and the thing that broke the economic wound was the announcement by US President "Trump" to double the tariff of US import on steel and Turkish aluminum In terms of 50% and 20% respectively, as penalties for the continued detention of Turkey's American priest "Andrew Brunson" for "espionage and terrorism" following the attempted coup in 2016.

This devaluation caused the lira to weaken against other currencies and to give many advantages to foreigners. A person who had a dollar last year would take 3.5 lira, the same person who can now get about 6.5 lira against that dollar.

Do we buy now?

Under those rising purchasing power of foreigners because of the fluctuation of the lira, with the rigidity real estate sector and not affected by crises; some might wonder if it is the right time to go to Turkey and buy a property, despite a crisis plaguing the Turkish economy, and can not predict its outcome under any circumstances, so There are many reasons that support the timing of entering the real estate market now, in addition to the fact that the sector is not affected by the recurrent crises that hit the economy from time to time, as has been mentioned recently, investment in the real estate market, as usual, real estate investments in general, is characterized by long-term investment, To benefit from the purchase of the property for few years, while one who’s interested in the crises experienced by the Turkish economy that it do not lengthen their periods in most cases.

The rule of real estate owners is to strengthen the sector and prevent its prices from falling even when the lira collapses. The Turkish government appears to have absorbed this well. It maintains good relations with the countries that top the list of foreign investors in purchasing Turkish real estate such as Iraq, the Gulf states, Russia, Because the commitment of these relations to care over the years, guarantees the government the continuation of the survival of Turkish real estate in the hands of citizens of these countries with the influx of usual new investors, fueled by the flow of real estate growth on the demand side, due to the origin of the turmoil and crises that are full of Middle Eastern and, paradoxically, all property is sold to a foreign investor in Turkey, does not give the confidence of the regional market close end in sight to the problems of the Middle East, therefore the demand remains high by the Arabs, which contributes to the continuing dynamism of the Turkish real estate sector, as soon as safe havens for capital.

The paradox is precisely how real estate prices continue to rise, which gives a possibility to be profitable. The house is bought by someone in Antalya city center in 2013 and wants to sell now will inevitably earn a lot of profits from the price difference between the date of purchase and the sale. Official statistics support this. Government studies indicate that in June 2018, Turkey's house price index rose by 0.55% compared to May 2018, and compared to the same period last year, the rate of house prices in Turkish, about 10%, compared to the last three years, the percentage increased by about 38%, up to 82% compared to prices about 8 years ago.

Shopping Map

If a person decides to invest in Turkish real estate, he should study the best places to buy them depending on the factors not noticed by ordinary investors in general, especially the speed of turnover of capital, the level of rising house prices, and opportunities for rent available, and in a large country such as Turkey, The West, covering 81 provinces and 8 geographic regions, offers an enormous number of destinations for buyers, from the leading cities to the small villages. One is likely to face many choices when deciding which area to buy, but according to statistics, Purchase Mediterranean Sea, Aegean Coast, and Istanbul.

Important procedures when purchasing

After determining the stability of the purchase, many measures should be taken that will follow the success of the purchase of the property, thus ensure that it achieves significant returns. Such measures include the need to inquire with the Directorate of the Land Registry If there are any restrictions on the property, it is forbidden to dispose of it, such as debt, mortgage, jurisdiction and other rights that prevent the transfer of ownership, and then caution against marketers. The increase in the discount rate on the housing unit, even if it reaches 50%, does not mean that it is a valuable opportunity. Or there is a scarcity of demand for such units, and the owner is unable to dispose of them. The seller will often ask the seller to complete the transaction and register at a lower price to reduce the value of the 4% tax that is paid equally. Here, the registration should be insisted on in real terms, but it protects the buyer's right and avoids any future problems or any misjudgment.

Abdul Aziz Al-Olayan tells his experience about buying the property in Turkey on his personal website and confirms some important points such as confirming the price of the project before taking it to ensure that the seller does not exaggerate the price. The price can be ascertained in several ways, including using one of the most famous selling sites, and the purchase of real estate "Sahibinden" Sahibinden, through which to review all the properties presented in the same project, and tracking the movement of the property over the previous months.

The previous step can be replaced by a procedure that is overlooked by many property buyers, which is the evaluation of the property by a specialized company or the bank if there is an agreement to take a loan, and the prices of this service are provided by specialized companies at a low price compared to the return, 2 to 7 lira per thousand pounds of the purchase price, depending on the company's fame and experience. The evaluation gives important and vital signals to the project, and the investor moves forward or backs down, signals such as the right price of the property, the prices of other projects in the same area, the future of the entire region in terms of services and facilities, and government interest. With important information such as the integrity of the legal aspects of the project, such as the existence of a building permit, and the absence of subsequent violations.

Prior to termination of the contract, there are several costs to be paid in the form of taxes and fees, either once or periodically, and must be absorbed before the completion of the purchase. The payment process begins immediately after the departure of the so-called TAPU or title deed. For example, there are monthly services for the property, known as revenues, ranging from 2 to 7 lira per square meter, depending on the level and location of the project. It is worth mentioning that these monthly expenses do not include the costs of electricity, water, and gas. As well as the purchase tax of 4%, the profit tax of 20% of the net profit, the annual municipal tax of 0.003% of the price per square meter, and other taxes.

Lira or Dollar?

When you make a real estate deal, a very important question arises: is it better to buy the property in the turbulent Turkish lira, or in a foreign currency such as the dollar or euro, etc.? To understand this, two friends who bought an apartment at the same price, one chooses to pay the pound and the other in dollars. They agreed to pay the installments. Assuming that the price of the apartment was $ 100,000. The exchange rate in early 2015 was 2.3 lira per dollar. The price of the apartment was 230,000 liras.

The two paid the first payment of the apartment and equal 10% as the first payment of the project, which means that the dollar buyer paid 10.000 dollars, while the buyer paid in lira 23.000 lira, and then came the second installment beginning in 2016 and are scheduled to pay the two of them 40% of the value of the apartments , But the value of the lira fell to 3 lira per dollar, the dollar buyer paid 40.000 dollars, while the lira buyer transferred only 30.6 thousand dollars to pay the amount of the second installment 92.000 lira. Then came the last installment of the apartment and was 50% at the beginning of last year 2017, which continued to lira to fall to 3.77 lira per dollar, and here the dollar buyer paid $ 50.000 to fully own, while the Lira converted only $ 30.5 thousand to 115 thousand lira the rest of the apartment price.

As a result, the dollar buyer paid $ 100,000 for his apartment, while the owner of the lira paid the same apartment for only $ 71.1 thousand, thus saving about 30% of the value of the apartment. This does not mean that buying lira along the line is the best; it is up to the lira expectations, and if the expectations are for a gradual decline in value, we follow the previous rules, and if they indicate gradual improvement;

The Lira can complete the savings in the price of the property if he decides to buy in a project that is still in its infancy, where the developer is in dire need of money to complete the project stages, and the person here can get really valuable offers. The question of confidence in the developer or the company is immediately mentioned. How can a person be assured of his money in a project that is still in its infancy? Here, it is possible to verify several things that reveal the degree of reliability of the developer, and free of obstacles and legal problems. The TOKI partnership is proof that the project will continue until delivery, as it ensures buyers complete the project if the developer or contractor fails.

The Tabu is the last step to complete the purchase of real estate in Turkey. Once all paper documents have been completed and both sides have fulfilled their contractual obligations, the property will be registered in the name of the new buyer and will receive the property title.

Although the collapse of the Turkish lira takes the levels of higher prices above the current levels of more than 15%, thus affected the standard of living of the Turkish people, but at the same time opens the prospects for foreigners abroad, they can access to Turkey, and benefit from The savings of exchange rate differences, both in consumer and productive spending, are beneficial to the people themselves.

Edit: Imtilak Real Estate ©

Source: Mydan Website - Al Jazeera Network

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