Procuring Potentially High Returns on Property in Istanbul

The property market in Istanbul has weathered the global financial storm well.  It has remained robust in pricing terms with minimal depreciation in underlying asking prices seen, yet there is plenty of room for negotiation for buyers who have the cash to negotiate with!  What’s more, there is potentially plenty of room for profit over the medium to long-term as Istanbul raises not only its international profile, but its presence on the global business stage.

In this article we’re going to focus specifically on procuring potentially high returns on property in Istanbul by making a good purchase in today’s market.  After all, no one can accurately predict where prices will move to in the future, so to be more assured of profit potential, you need to buy well today.

The keys to getting the right property at the right price in Istanbul are finding the best location, negotiating well with local input, having quality legal assistance and ultimately undertaking significant due diligence before entering the market.

It’s become a very well known fact that property in Turkey can offer exceptional returns in the form of rental income and even in the form of modest price gains – particularly if you approach the markets in the main coastal tourism hotspots, in the nation’s capital Ankara or in its iconic city of Istanbul.  However, many have tried to capitalise on the thirst for property for sale in the country’s coastal towns and cities, and as a result tales of disaster stories are beginning to abound.  Developers who have been hit by falling sales thanks to the global recessionary trend have disappeared with people’s deposits, paid for homes have failed to materialise, and those affected are beginning to realise just how difficult it is to go back and undo what they sewed when they almost unquestioningly signed on the dotted line.

It is probably only because there has been less intense international interest in property for sale in Istanbul that these tales of people being ripped off have not flowed from the city.  Because, no matter where in the world we’re talking about, when property greed begins to overwhelm a real estate economy, the sharks and cowboys come out of the woodwork or fly in and set up shop to rip off the unassuming, ill informed and naïve.  It’s a sad but very true fact.  Therefore, one has to tread carefully when buying property abroad – and here’s how to do just that, specifically in Istanbul.

The market in Istanbul has been complicated in recent years by the government preventing properties in certain districts from being sold to foreigners, then changing its mind – and by suggesting that another crossing will be built over the Bosphorus at ‘some point’ in the future, possibly at Tarabya, which of course means one must tread exceptionally carefully around potential sites that could be bought up and demolished for the required road and bridge infrastructure if and when the plans for another crossing come to fruition.  So, from this point of a little uncertainty about the market, let’s look at what is known about property in Istanbul. 

Well, there is massive demand for housing and office space in the city and this is not predicted to decline.  Turkey’s economy is considered to be on the brink of positive things as the nation as a whole works towards European Union integration potentially, and because the entire nation is considered hugely important as a manufacturing base for example.

However, certain areas of the city are exceptionally poor, some are really no go areas for foreigners, some are over priced, and therefore you need to work not only with a reputable and knowledgeable real estate agent, but you need good local support to help you find the right property at the right price.  If you don’t have a good friend in Istanbul to guide you, our advice would most certainly be to find a decent lawyer who has experience in the property market in Istanbul who can guide you instead.  Perhaps seek their assistance and guidance over where to buy, and certainly listen to what they say about the reputation of any developer you’re thinking of buying from.  Do not take a recommendation for a lawyer from your real estate agent, perhaps approach the British Turkish Lawyers Association for their advice first. 

The most popular neighbourhoods are any along the Bosphorus – however, these are also many of the most expensive addresses in Istanbul too.  But if you have the cash to splash, look at the likes of Bebek, Emirgan and Yeniköy because just a view of the water will add massive value to a property.  If you’d rather have more of Istanbul’s old world charms around you, head to the old city or the centre – but wherever you look, make sure you do your due diligence.  From looking at the construction of the property from its foundations to its roof, from looking at title deeds and your eligibility as a foreigner to own that home…you have to understand that the onus is so heavily on you to make a careful and well researched purchase.

We would suggest that you have a full structural survey of a property done and that your right to buy and legally own is confirmed – only then can you consider making an offer.  Understand that in Turkey it is the norm for properties to be marked low in terms of price on title deeds as a way to evade taxation – and that you need to insist on the actual price you’re paying for your property being put on your deeds otherwise when you come to sell, if your buyer insists on the same and you have artificially put a low price on the deeds, you could become liable for significant capital gains taxation on the difference between the two prices.

Understand how much VAT you will be open to before you buy – it ranges from 1 to 18% and as you can imagine, this can make a huge difference to the final price you pay.  Finally there’s a British based firm now claiming to offer competitively priced mortgages to buy property in Istanbul – unfortunately we know nothing about the firm in terms of whether they are reputable or whether they deliver what they say they can - such as equity release on Turkish properties and up to 70% LTV mortgages.  But feel free to check them out, they’re called Istanbul Mortgages and maybe they too can help you get a well priced property in Istanbul from which you can profit in the form of rental income in the short term, and in the form of property price appreciation over the longer term.