Will Turkey remain attractive to foreign investors in 2023?

Important events of May 2023

May 2023 will be a pivotal moment in Turkey's history, as elections will be held for both the presidency and parliament during this period. Against the backdrop of these significant events, there is an active discussion of many social issues in the country.

Rise in real estate prices

One of the most pressing issues has been the catastrophic rise in housing prices, both for purchase and for rent. According to Endeksa, in 2022, the cost of apartments and houses in the national currency, lira, increased by 2 to 4 times.

Considering the level of inflation, the price increase has reached57%which is the highest indicator among all countries according to Global Property Guide information for the third quarter of 2022.

Rental rates

Rental prices also showed impressive growth rates.

• Istanbul –144%compared to the previous year (from November to November);
• Ankara –163%;
• Antalya –213%.

According to data provided by the Turkish statistical agency, the share of real estate sales to foreigners is only4.5%For comparative analysis, this indicator reaches in Cyprus20%This indicates that the real estate market in Turkey is primarily focused on the consumer demand of local residents.

Interests of local residents

Citizens of the country are actively investing in housing, trying to protect their savings from high inflation, which has officially reached85%in November.

Nevertheless, in popular tourist regions such as Istanbul and Antalya, property sales to foreigners still account for a significant portion of the overall market volume.

Initiatives of local residents

For example, in Alanya, which is particularly popular among Russian-speaking citizens, local residents initiated a petition to the mayor asking to ban the sale of apartments to foreigners. Similar proposals were made by Kemal Kılıçdaroğlu, the leader of the opposition party and a potential rival of the current president Recep Tayyip Erdoğan in the upcoming elections.

Proposals to ban sales to foreigners

He proposed to introduce a five-year ban on the sale of real estate to foreigners until housing prices stabilize.

Change in government policy

In the current situation, the authorities, who previously enthusiastically attracted foreign investors, are now forced to impose restrictions on the purchase of housing by foreigners in order to protect the interests of the national population.

So, in June of last year, the minimum threshold for participation in the "citizenship by investment" program was raised.$250,000to$400,000In July, more than a thousand districts were closed to foreign investors for obtaining a primary residence permit, especially in cities that are popular among foreign nationals.

Issues with residency

Thus, although investors can purchase property, the process of obtaining residency becomes complicated for them.

Tightening of requirements

At the end of December, information was received about stricter requirements for real estate that can be purchased by foreigners for obtaining citizenship. Additionally, starting from December 26, there has been a noticeable increase in the number of refusals for foreign citizens in obtaining or extending tourist visas, often without any official explanations.

Conclusion

These actions highlight changes in government policy aimed at balancing the interests of local residents and foreign investors, as well as stabilizing the real estate market amid rising inflation. The elections in 2023 will undoubtedly have a significant impact on the further development of the real estate situation in Turkey and in the area of migration policy.

Changes in the process of obtaining a residence permit in Turkey

Recently, the process of obtaining a residence permit in Turkey for those renting or purchasing real estate has undergone significant changes. Previously, this process allowed individuals to stay in the country for six months to two years, but it did not permit legal employment. It is important to note that the issuance of the second type of residence permit, which is based on property ownership (tapu), is still available. However, it is essential to know that for obtaining it, the property value must be at least75,000 US dollarsif the apartment or house is located in major cities, and at least50,000 dollarsin less populated and less in-demand areas.

Problems faced by job seekers

After the start of the conflict in 2022, many citizens of Russia and Ukraine began actively considering Turkey as a place for temporary or permanent residence. However, those who did not manage to obtain a residence permit beforeDecember 26, 2022They faced problems and refusals, which forced them to urgently reconsider their plans. Given the current instability and changes, can Turkey still be considered an attractive option for buying real estate and relocating? What steps should be taken by those who already own property or are planning to purchase it? We reached out to experts in this field to get their opinions.

Ambiguity of the situation

It's interesting that information about the reasons for the denial of tourist residence permits is quite limited, and the sources often contradict each other. The situation can vary significantly across different regions of the country, and sometimes even within the same city:

• Some banks receive approval;
• Others, on the contrary, face rejections;
• The logic behind these decisions often remains unclear.

The current situation with the issuance of tourist residence permits.

What is really happening with the process of obtaining a tourist residence permit in Turkey? Is the suspension only for Russian citizens, or does it concern all foreigners in general? We will also be waiting for official comments from the authorities. One of the specialists, Sergey Volchenkov, who is the development director at Tolerance-Homes, noted that "under the conditions of the elections, the process of obtaining a tourist residence permit in Turkey has started to resemble a lottery. Many are facing rejections even in regions where it was previously accessible." These difficulties have been arising since the end of December 2022 and continue to persist.

Requirements for submitting an application

Now, when applying for this type of residence permit, applicants often face requirements to provide documents confirming their employment in their home country or their financial stability. Unfortunately, at this time, there have been no official statements from the authorities clarifying the current situation.

Exceptions and conditions for citizens of Ukraine

It is important to note that difficulties in obtaining a tourist residence permit do not affect those who own real estate. Additionally, it is worth emphasizing that Ukrainian citizens are still being issued residence permits under the previous conditions, without significant changes in the rules. In the current circumstances, obtaining a residence permit in Turkey requires involvement and attention, which is important to consider when making decisions.

Changes in obtaining a tourist residence permit

In recent months, there have been significant changes in the process of obtaining a tourist residence permit (TRP) for foreigners. This was reported by Ksenia Baldzhi, the executive director of Liga Real Estate. These innovations affect not only citizens from Russia but also other foreign nationals, which is causing a wide resonance.

Regional differences

Differences in the attitude towards Ukrainian citizens may arise depending on the specific region; however, this practice is not universal and varies by location. Currently, there are no official clarifications regarding who is entitled to apply for a tourist residence permit. As a result, numerous inquiries have been sent to the migration authorities in those cities where the largest number of foreigners are concentrated.

Responses from the migration services confirmed the complete suspension of tourist residence permits for all categories of citizens.

Conditions for obtaining a residence permit in certain regions

According to unconfirmed information, there is a possibility of obtaining this type of residence permit in regions of Turkey that are not popular among tourists, such as Bursa, Konya, and Hatay. However, this information needs to be verified.

Visit to the immigration office

Anastasia Kezik, the marketing director of Alanya Property Sales, highlighted important points identified during a visit to the migration office in Alanya. During this visit, there were no mentions of official suspensions of residence permit issuance, except for the so-called "closed" areas.

However, today there is a growing interest in the financial indicators of applicants in migration services. In particular, if a person has an account in a Turkish bank with a statement showing monthly expenses of 15,000 lira, this is often sufficient for obtaining a residence permit. In extreme cases, it is possible to use a statement from a Russian bank, but only if it reflects expenses incurred in Turkey.

Requirements for applicants

It should be noted that now when contacting the migration service, it is necessary to fill out a form indicating sources of income.

Refusals to issue residence permits

So far, the clients of our agency have not faced any refusals in obtaining residence permits, although representatives of the migration service indicated that extending a residence permit based on rental agreements without additional grounds, such as studying or medical treatment, will no longer be possible.

Buying real estate for obtaining residency.

Some citizens are wondering what to do for those who intend to purchase real estate in Turkey to obtain a residence permit. Sergey Volchenkov reported that currently there are no refusals in issuing or extending residence permits under the TAP program related to property purchases. Given the importance of this segment for the Turkish economy, it is unlikely that we should expect a complete closure of this opportunity.

There is a possibility that stricter restrictions may be introduced, but a complete refusal on this matter is unlikely to happen.

Recommendations for buying real estate

Ksenia Balzhi once again emphasized that if obtaining a residence permit is the main reason for purchasing real estate, it is advisable to consider ready-made options located in areas where obtaining such a residence permit is not problematic. It is important that these options meet the criteria of the TAP program.

It is advisable to keep track of current requirements and changes to avoid unexpected situations related to immigration issues.

Potential risks of investing in real estate

It is important to understand that investing in real estate during the construction phase can be associated with certain risks. The main reason is that there is a possibility that by the time the construction is completed, which usually takes from one and a half to two years, the area may become unavailable for obtaining the initial residence permit for foreign citizens. As of today, no one can guarantee that such a situation will not arise in the future.

What to do with the cadastral value?

As for those who have already purchased an apartment, but the cadastral value is slightly below the minimum established threshold for a secondary residence permit, thenKsenia BalzhiIt explains the importance of the difference between cadastral value and professional property appraisal, as these terms are not equivalent. Cadastral value is the information reflected in the documents for the property and serves as the basis for selecting housing for the purpose of obtaining citizenship. Meanwhile, for obtaining a residence permit, an expert valuation that is close to market value is required.

Examples of pricing policies in different regions

For example, at the marketAlanyiIt is practically impossible to find apartments priced below 100,000 euros, so any property purchased in this region will meet the criteria for obtaining a residence permit. However, in...MersinThe starting prices are around 60,000–65,000 euros. To reach the required amount of 75,000 euros, it will be necessary to invest in an apartment with a slightly larger area, which, in turn, implies a higher price.

Re-examination of real estate

If you have already purchased property before and have an expert appraisal with a low value, you have the option to initiate a re-evaluation. According to current legislation, you can request a re-evaluation once a year. It is possible that since your previous purchase, the market value of the property has increased and meets the established requirements.

Options for already purchased real estate

Sergey VolchenkovIt is noted that if you have already become the owner of an apartment in Turkey, but its expert value does not reach the required threshold, you should consider the option of obtaining a tourist residence permit by confirming your application through the ownership of property.

Anastasia KezikIt adds that if you purchased an apartment earlier and its cadastral value is below 75,000 euros, but you do not have an expert appraisal, you can try applying for a tourist visa by providing documents that demonstrate your financial resources, such as a bank statement.

Obtaining a residence permit through rental

As for those who planned to obtain residency through rental,Sergey VolchenkovIt clarifies that if you are denied a tourist visa based on rental reasons, you will not be able to reapply for the same type of visa for six months. However, if you own property, you can reapply for a residence permit based on your ownership rights, and in that case, you do not have to wait for the six-month period to end.

The impact of changes in the real estate market

How can changes in the market affect consumer interests?

Before the start of the new calendar year, there is a typical decline in market activity as many people are busy preparing for the holiday season. However, at the moment, we are noticing a renewed increase in requests for rental housing.

Growing interest in rental housing

Sergey Volchenkov points out that interest in renting real estate in Turkey for obtaining residency may decrease if the relevant authorities do not provide clear explanations in the near future. At the beginning of 2023, the market situation is characterized by high dynamics: buyer interest remains at a fairly high level, and according to forecasts, it will continue to grow.

New government assistance program

One of the factors that could contribute to an increase in sales is a new government loan assistance program, which is expected to launch this month. Although the program is primarily aimed at Turkish citizens, its effects will significantly impact the entire real estate sector.

Changes in the investment citizenship program

As for citizenship, there have been significant changes in the investment citizenship program. Was it previously possible to acquire two properties worth $200,000 each to obtain citizenship? This question now requires clarification. Sergey Volchenkov emphasizes that starting from the end of January 2023, changes will come into effect in Turkey that, although technical, are of great importance.

Key changes

• Acquisition of real estate in new developmentsIf you are planning to purchase real estate in a new building through a notarial contract, at least one property must be registered under this contract. This means that you cannot buy several apartments from different developers or in different residential complexes to obtain citizenship. Only apartments purchased from one developer are taken into account, even within the same residential complex.
• Secondary real estate marketThis rule will not apply to the secondary market and primary real estate objects that are in the final stages of construction and are subject to registration in the cadastre and title. In such cases, it remains possible to acquire multiple properties that meet the conditions of the investment citizenship program.
• Rules of kinshipThe property purchased under this program cannot be owned by Turkish citizens who are directly related to the foreign buyer. This important requirement should be taken into account when making a purchasing decision.
• Using an object to obtain citizenshipOne property can be used to obtain citizenship only once. Additionally, joint ownership of real estate is prohibited. To participate in the program, the title deed will be registered in the name of the main applicant, and their family – spouse, minor children, and dependents – will also be eligible to apply for citizenship.

The impact of changes on the investment climate

The aim of these changes is to clarify the process of obtaining citizenship through investment, which should have a positive impact on the investment climate and attract more foreigners looking to buy property in Turkey. Thus, the new regulations in the real estate market create both opportunities and limitations for potential investors and migrants seeking citizenship.

Expectations of potential buyers

It is noticeable that many potential buyers are still waiting for new regulations, wanting to understand all the new aspects before making a decision to invest in Turkish real estate.

Restrictions on real estate for citizenship

Within the framework of this program, there are certain restrictions regarding the real estate that can be used to obtain citizenship. First of all, real estate assets that have been transferred to a Turkish citizen or a foreign legal entity in the last three years are not eligible for this program.

Objects that were previously owned by Turkish citizens who obtained a passport through investment cannot be taken into account. Additionally, assets that are under the control of companies whose founders or close relatives are the buyer themselves are also excluded.

This also applies to organizations registered under paragraph 36 of law number 2644. It is important to note that this includes companies where the share of the foreign founder exceeds 50%, or management decisions are made solely by them.

Rules for renting and selling real estate

It should be emphasized that if you decide to purchase an apartment for the purpose of obtaining citizenship, you can rent it out without any restrictions. However, such a property cannot be sold within the first three years after the purchase.

During this time, you cannot resell the property; otherwise, your citizenship may be revoked – this rule excludes the possibility of transferring the property back to the previous owner. If your property is purchased by a foreign citizen, they will also not be able to participate again in the "citizenship by investment" program, as they will have ownership rights to that property.

Real estate rental for obtaining citizenship

Many experts report that renting out property purchased for obtaining citizenship is allowed, and many clients practically use this approach by buying, for example, two apartments: one for living in and the other for renting out.

However, one important consideration is that you cannot rent out an apartment if the owner is registered at that property.

Increase in the investment threshold

Regarding the possible increase in the threshold for real estate financial expenditures, experts' opinions are divided. Some, like Ksenia Balzhi, believe that such a change may occur after the elections scheduled for May 2023.

Recommendations for choosing real estate

When choosing real estate for obtaining citizenship, it is advisable to focus on properties with a high cadastral value. This year, there has been an increase in cadastral value, which is due to the authorities' efforts to prevent price undervaluation by developers, as was seen in the past.

• It is recommended to pay attention to properties that have been owned by Turkish citizens or companies for at least three years.
• It is also important to consider the possibilities of investing in commercial real estate, as it typically has a higher cadastral value compared to residential sectors and can provide stable, if not guaranteed, income.

Such properties continue to be of interest to investors who wish to obtain citizenship through the purchase of real estate in Turkey.

Changes in legislation and investment opportunities

Anastasia Kezik reported that recent changes in legislation have significantly limited the options for obtaining citizenship. However, investment alternatives still exist, and with the right approach, it is possible to find a profitable option. Sergey Volchenkov strongly recommends considering the purchase of real estate with a market value exceeding certain minimum thresholds: $50,000 or $75,000, depending on the type of desired status.

It should be emphasized that many mistakenly believe that this amount should be directly reflected in the contract. In fact, according to legal requirements, this information must be included in the expert report, which must be obtained before signing the purchase agreement.

Concerns in the real estate market and the impact of elections

Ksenia Balzhi shared her thoughts on how the upcoming elections could impact the real estate sector. In her opinion, if the current government remains in power, market activity will continue to grow: both demand and prices for residential real estate will increase.

However, it is important to be cautious about the potential increase in investment thresholds for obtaining residency or citizenship. Even in the event of a change in government, it is unlikely that a strict ban on the sale of real estate to foreigners will be implemented. This proposal, put forward by the opposition party, has been received negatively both by their supporters and by those who actively conduct business in the construction sector and depend on sales to foreign clients. Everyone understands that without an influx of foreign capital, the economic situation in Turkey could significantly worsen.

Key points to pay attention to

• No easing of migration policy is expected.Before the elections. In 2023, new restrictions may be possible, such as increasing the minimum investment amounts and closing certain regions to foreign buyers.
• Introduction of a complete ban on the sale of real estate to foreigners,Even in the case of the opposition coming to power, it's unlikely.
• The greatest risks concern those who...Who was planning to obtain a residence permit through renting?These individuals are required to confirm the level of income they receive outside of Turkey. According to the requirements, the amount must be at least $650 per person, which corresponds to one and a half minimum wages.

Documents from the employer must be notarized and have an apostille. However, even having a statement of account activity from a Turkish bank and proof of income does not guarantee a 100% chance of obtaining a temporary residence permit. It is also important to note that disputing one's rights in a Turkish court is extremely difficult, and many face various problems in this area.

Recommendations for purchasing real estate

If you are planning to buy an apartment in Turkey to obtain a residence permit, it is wiser to choose a property that costs more than $75,000, both in terms of appraisal and cadastral value. Currently, the focus is mainly on the appraised value, but there is a possibility that in the future, cadastral data will also be taken into account.

It is important to remember that in order to obtain a residence permit, the property must be registered in the name of one owner; however, their family will be able to apply for a temporary residence permit. This aspect should be taken into account when choosing real estate to avoid potential complications in the future.

Conclusion

Shortly before the elections in Turkey, the real estate market and the issuance of residence permits witnessed significant changes that could have a serious impact on future investment decisions for both locals and foreign citizens. As I described in the article, the sharp rise in housing prices and rental rates, along with the tightening of immigration regulations, have significantly altered the landscape for those considering purchasing property in the country.

Many foreigners, especially considering the unstable political situation and economic difficulties, find themselves needing to reassess their plans. Turkey, once seen as an attractive investment destination, may now raise more questions than confidence among potential buyers. The overwhelming majority of Russians and Ukrainians who came to Turkey in search of a new life are facing challenges in obtaining a tourist residence permit, which further complicates the situation.

Prospects of the real estate market

Nevertheless, even in conditions of uncertainty, many experts still maintain optimism about the long-term prospects of the Turkish real estate market. Factors such as:

• Infrastructure development
• Increase in the number of tourists
• Stable domestic demand

They can further push the market towards recovery. It's important to pay attention to current changes and adapt your investment approaches to the new realities.

Recommendations for buyers

For those who have already purchased real estate or are planning to do so, a sensible approach involves being attentive and ready to adapt. I recommend future buyers and investors:

• To closely collaborate with professionals
• Stay updated with the latest news to keep track of all the changes happening in the market.

In conclusion, it can be said that the current realities require us not only to be ready for changes but also to actively seek information and support. Understanding the current situation and trends, as well as being prepared to adapt, will be key factors for successful investing and living in Turkey in the future.