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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