Foreign purchases of real estate in Turkey
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Purchasing property in Turkey is becoming increasingly popular with European holiday home owners. Several factors are contributing to this popularity and this trend recently had important repercussions inside Turkey. The issue is especially notable given Turkey's potential EU membership and related economic integration issues.
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[edit] Recent Legal Changes
The principles governing purchase of property by foreign (i.e. non-Turkish) nationals in Turkey is governed by the 1934 Property Act (Law Nr. 2644 dated 22 November 1934). The legal framework set up in 1934 was modified for a first time by a by-law (Law Nr. 4916) dated 3 July 2003. This law was predicated on a reciprocity clause; that is to say, citizens of countries whose governments allow Turkish nationals to purchase real estate in their country, were to be allowed to purchase real estate in Turkey.
However, following steps taken by Turkey's main opposition party CHP, the modifications brought by the 2003 by-law were declared as void by the Turkish Constitutional Court on 26 April 2005, in a decision to enter into effect as of 27 July 2005 and the purchase of real estate by foreign nationals was suspended until a modified law dated 7 January 2006 was brought into effect. This law, Law Nr. 5444, now enacted, instead of being a by-law modifying various paragraphs of the 1934 Property Act, is a fully stated legal text (still on the basis of a modification of the 1934 Act). (the full text in Turkish). This current law is retrospective in its application to 26 July 2005 and is largely the same as the law of 3 July 2003, with the following notable amendments:
- A foreign national cannot purchase more than 25,000m² (6 acres) of land (constructed or not) in Turkey without special consent from the Turkish Council of Ministers.
- Foreign national ownership of real estate cannot exceed 5/1000 of land in any designated province.
It should be noted that, for the moment, all overseas nationals are subject to a clearance by the Turkish military authorities before being allowed to proceed with any purchase. This is to establish that the land/property is not in a militarily sensitive area, and that the individual is considered as suitable to own real estate in Turkey. Designation of land suitable for overseas purchasers is expected to be determined at a later stage by Land Registry Offices, based on information supplied by the military.
The Council of Ministers is also expected to determine, in the three months following the promulgation of the law, those areas where reserves on purchase due to considerations stemming from irrigation, energy, agriculture, mining, history, religion and culture issues and for preservation of natural flora and fauna are put in effect. Property acquired through inheritance is not subject to the limitations and reserves stated above.
[edit] Foreign Ownership Market Trends to 2005
Taken as a whole, during the 69-year period starting in 1934 with the enactment of the Property Law until the first modifications of July 2003, 37342 parcels of property had been acquired by non-Turkish legal entities (companies) or private individuals in Turkey. It is to be noted that 2400 of these were Syrian nationals, who themselves had remained as such but whose properties had become part of the territory of Turkey with the adhesion of the Republic of Hatay to Turkey in 1939, the whole transitional proceedings that took place having been counted, for the purposes of statistics, as re-acquisitions by these Syrians.
The 2-year duration of the validity of the old law (July 2003-July 2005) gave some interesting insights on foreign national property buying trends in Turkey both for property market players and for official bodies.
During the two years for which the July 2003 modification had remained valid, 15842 parcels of property (2931 among these being unbuilt land lots) have been acquired by non-Turkish legal or private persons in Turkey. The purchasers constituted a total of 18959 legal or private owners or co-owners from a total of 58 different countries. In the forefront came British nationals (8625 persons acquiring 6333 parcels), who were followed by Germans (3482 persons for 3210 parcels), with Dutch nationals, Danes, Norwegians, Greeks, Irish nationals, Swedes and Belgians respectively occupying the next places. (Reuters İstanbul - in Turkish)
It was also observed that, during this 2-year period, the districts most favoured by foreign buyers were Alanya, Fethiye, Didim, Bodrum, Kuşadası along the coastline, as well as Ürgüp in Cappadocia. Alanya is a particularly preferred location for Germans and Scandinavians, while the British purchases are at their highest level of concentration in Fethiye and Didim Reuters İstanbul - in Turkish. Some of these towns have come to include sizable proportions of seasonal or full-time inhabitants made up of foreign homeowners. These homeowners already display a marked tendency to set up associations among themselves to promote their specific areas of interests such as the translation of key texts into their respective languages, contacts with officials, cultural and religious activities such as church-building and to provide guidance to newer purchasers (see Expat community web portal in Turkeyor an alternative but comprehensive resource)
[edit] Points of Controversy in Turkey on Foreign Home Ownership
The foreign purchase of real estate is a widely discussed subject in the Turkish media and among the public, although some of the opinions put forth in this context do not seem to be based on sound and objective facts. Opponents of liberalisation and internationalisation of the real estate market in Turkey have made certain allusions based on interpretations of evolutions in Spain and Israel.
Another issue which will inevitably arise is the concern over the specific case of Greek nationals. Despite EU pressures, a national land registry system is yet to established in Greece (except in the Dodecanese, where the system was set up during the Italian rule between 1912-1945). Thus, a legal move questioning whether there could be reciprocity with a country without a land registry system was indeed launched under the auspices of opposition CHP party, before the application covering the new law in general was made to the Constitutional Court and set the agenda. The issue will almost certainly not be dismissed easily by proponents of a liberal property market. In addition, there are also occasional reports of a more sensational nature, usually specific to some sections of the media. These relate to Israeli or Arab investors buying land en masse in the prospering Southeastern Anatolia Project region, politically-minded purchases in the Black Sea region or in Eastern Anatolia, where sizable communities of Pontic Greeks or Armenians previously lived.
The challenge for the Turkish government will be to negotiate a path which satisfies the sceptical elements within Turkish politics and among the public, while at the same time appeasing liberals and satisfying the open-market criteria which the E.U. expects from Turkey as it moves towards accession.
[edit] Notes on Foreign Ownership Market Trends under the new legislation (after 7 January 2006)
After the annulment of the 2003 Law in July 2005, during the 6-month period of legal uncertainty, the market (focused on foreign buyers) understandably came to a standstill. However, local Land Registry Offices continued to process applications in anticipation of the new law.
Recent news on overseas buyers from the First Economic Counsellor of the Turkish Embassy in London is as follows (unedited):
Britons first in buying property in Turkey in 2006.
"Britons were first in buying property in Turkey among foreign nationals in the first quarter of the year according to the latest data released by the Land Registry Office. From 7 January 2006 when the new law on "purchase of property by foreigners in Turkey" was put in to effect, to mid-April 2006, 588 British Citizens purchased 420 properties in Turkey. Secondly 265 Germans bought 258 properties in Turkey. In the same period, total property sale to foreigners and total foreigners bought property in Turkey reached 1,206 and 1,565 respectively. (25 April 2006)"
The newspaper Cumhuriyet reported on 11 June 2006 that, because the 5/1000 limit was exceeded in Hatay Province, sales to foreign nationals of real estate situated in that province has been suspended until further notice. The congestion is a consequence of 1300 parcels of property that have been bought in recent times by foreign nationals adding up on the 2400 land lots owned by Syrians, some of them quite large. The specific case of Hatay Province taken apart, as of 1 June 2006, Antalya Province was in the lead in the number of foreign purchases of real estate in Turkey with 5566 lots, provinces of Aydın (3998), Muğla (3035), İstanbul (1463) and İzmir (722) occupying the following places.
