Turkey's housing market six months before the elections: refusals of residence permits and restrictions in the Citizenship by Investment program

People and markets

Parliamentary and presidential elections are due to be held in Turkey in May 2023. On the eve of these events, the polemic on various aspects of the social agenda has intensified in the republic. One of the painful points for the population is a huge increase in housing prices, both for purchase and rent. In 2022, apartments and houses have risen in price in lira 2-4 times (according to Endeksa). Adjusted for inflation, it is more modest by 57% (according to Global Property Guide for the 3rd quarter of 2022), but this is the highest indicator among all countries of the world. Rental rates also rose more than anywhere else: in Istanbul (for the year from November to November) by 144%, in Ankara by 163%, in Antalya by 213%.

According to of the Turkish Institute of Statistics, the share of sales to foreigners was only 4.5% (for comparison, in Cyprus it reaches 20%). This suggests that the market is warmed up due to local demand (people invested in "concrete", saving savings from huge inflation, which officially reached 85% in November). Nevertheless, in the resort regions and Istanbul, the number of transactions with non-residents is significant. Residents of Antalya province, which includes the beloved Russian-speaking Alanya, even sent to the mayor petition with a request to ban the sale of apartments to foreigners. It was with this thesis that Kemal Kilicdaroglu, chairman of the opposition party and a likely opponent of Recep Tayyip Erdogan in the upcoming elections, recently made a ban on the sale of housing to foreign citizens for 5 years until prices normalize.

The current authorities, who at one time loosened the ground to attract foreign investors, are now forced to take measures to somewhat limit foreign demand for Turkish real estate and to protect national interests in this matter as much as possible. In June last year, the threshold for necessary investments under the Citizenship by Investment program was raised (from $250,000 to $400,000), in July more than a thousand districts are closed for obtaining a primary residence permit, including in the cities that are in demand among visitors, that is, an investor from abroad can buy an apartment there, but not issue a residency.

At the end of December, it became known about some tightening of requirements for acquired objects for citizenship.

In addition, starting from December 26, foreigners are massively denied extradition (less often – and extension) the so-called tourist residence permit , and without official grounds for this. Previously, this residence permit, which permits residence in the country, but does not provide for employment, could be obtained without problems for a period of six months to 2 years for those who rent housing in Turkey or bought any real estate in the country. At the same time, the second type of residence permit continues to be issued by TAPU (certificate of ownership of real estate). However, only on condition that the object you purchased costs (according to the expert opinion) $75,000 and above if it is located in large popular cities or $50,000 and above in small, little-sought-after localities.

It's no secret that many Russians and Ukrainians went to Turkey in 2022 in search of a safe haven. Those who are unlucky enough to get a residence permit before December 26, 2022, receive quite painful refusals and are forced to urgently change their plans.

In the context of changes and uncertainty, does Turkey still continue to be an attractive place to buy real estate, both for the purpose of moving and for the purpose of investment? And what should those who have already bought or are planning to buy an apartment do? We asked market experts to give their vision of the situation.

It should be noted that since there is no official information about refusals in a tourist residence permit, information from different sources differs significantly. Moreover, there is no single approach in all provinces, and even in one region, someone approves an application, and someone is denied, and the logic in this is often not traceable. 

Questions about a residence permit

What happens to the issuance of a tourist residence permit in Turkey? Is it suspended only for Russians? In all cities or only in "hot" zones? Is any official statement expected from the authorities?

Sergey Volchenkov, Development Director Tolerance-Homes: Before the elections, the issuance of a tourist residence permit in Turkey acquired the character of a lottery. Indeed, many are now facing refusals, and in "open" areas for residence permits. This situation began on December 26 and continues to this day.

In addition, many people applying for this type of residence permit now began to ask for documents from their place of work in their country or documents on financial security.

Unfortunately, there is currently no official statement from the authorities or document.

It should be emphasized that this situation does not concern the issuance or extension of a residence permit by TAP, that is, when purchasing real estate.

I would also like to note that Ukrainians continue to be issued a residence permit, as before.

Ksenia Baldzhi, executive director Liga Real Estate: The issuance of a tourist-type residence permit for all foreigners, not only for Russians, has been practically suspended. In some places they are more loyal to Ukrainians, but not everywhere. 

There was no official document regulating who can be issued a tourist residence permit and who cannot. We sent several requests to the migration services of those cities where there is a particularly high concentration of foreigners, and the answer came about the complete suspension of the issuance of a tourist residence permit for everyone.

Anastasia Kezik, Marketing Director Alanya Property Sales: Recently I was in the migration service in Alanya and clarified – there is no question of any official suspension of the issuance of a residence permit yet (we do not consider «closed» areas).

Nevertheless, the migration service began to check the applicants' incomes more seriously. For example, if a person has an account in a Turkish bank and attaches a statement on the movement of funds, where it is clear that he spends about 15,000 liras or more per month, then this should be enough. In extreme cases, an extract from a Russian bank will also be suitable, but it should reflect spending on the territory of Turkey.

One more point. Already on the day of the rendezvous, it is now necessary to fill out a questionnaire, which indicates, among other things, the source of income.

I would like to note that there have been no refusals in the practice of our agency's clients so far, although the migration service warned me that a residence permit only for rent without additional grounds (for example, study, treatment) will not be extended anymore. 

What should those who plan to buy an apartment in Turkey with a residence permit do?

Sergey Volchenkov: So far, there have been no refusals to issue or extend a residence permit on TAP, that is, based on the purchase of real estate. I think that, given the importance of this sector for the Turkish economy, it is definitely not worth expecting a complete refusal - perhaps additional restrictive measures can be taken, no more.

Ksenia Baldzhi: If a residence permit is the key purpose of the purchase, then I recommend looking at ready-made options in areas open for a residence permit, of course, meeting the criteria for a residence permit by TAPU.

I note that investing at the excavation stage in this case is risky, since there is a possibility that by the time the house is put into operation in 1.5-2 years, the area may already be "closed" for registration of a primary residence permit by foreigners. At least, there is no guarantee that this will not happen today.will give. 

What should those who have already bought an apartment do, and its cadastral value is below the threshold for the second type of residence permit?

Ksenia Baldzhi: A clarification needs to be made here. It requires not a cadastral, but an expert value of real estate, and these are two big differences. Cadastral – this is the one that is prescribed in the TAPU and which is looked at when choosing a property for citizenship. But for a residence permit, not a cadastral, but an expert value is needed, which is close to the market.

For example, in Alanya it is not possible to find apartments cheaper than 100,000 euros, respectively, any object that you buy here will fit the criteria for a residence permit by TAP. 

In Mersin, starting prices are now 60,000 -65,000 euros. Thus, you need to buy an apartment a little larger in area and, accordingly, a little more expensive to reach the required threshold of 75,000 euros. 

If you have already bought an apartment before, and you have an expert opinion on hand, where the cost is indicated below the threshold, you can order a repeat one. Once a year you have the right to order a re-examination. It is likely that the price of your property has increased since the moment of purchase and reached the required limit.

Sergey Volchenkov: If you have already bought an apartment in Turkey, and its expert value is below the threshold established by law, you should apply for a tourist residence permit, confirming your application with the presence of property.

Anastasia Kezik: If you bought an apartment before, according to the cadastre it costs less than 75,000 euros, and you cannot provide an estimated cost, you should try to apply for a tourist residence permit by providing documents on financial solvency (at least a bank statement on the movement of funds).

Can those who planned to get a residence permit for rent legally stay in Turkey?

Sergey Volchenkov: After receiving a refusal of a tourist residence permit for rent, you cannot apply for the same type of residence permit for 6 months. But, having acquired real estate, you have the right to apply for a residence permit for a second time, already on the basis of real estate ownership. In this case, it is not necessary to wait for the end of the six-month period.

How has the situation affected or will affect demand? What objects do you recommend buying today for a residence permit?

Anastasia Kezik: There is no decrease in demand yet. Before the New Year there was a usual decline, as people are busy with the holiday at this time, but now there is a wave of requests again.

Sergey Volchenkov: The demand for renting apartments in Turkey for the purpose of living and obtaining a residence permit may fall if the authorities do not clarify this issue in the near future.

I can characterize the general market situation at the beginning of 2023 as active. Demand is high and, according to our forecasts, will grow. In particular, the new state program of preferential housing lending, which should start this month, should give another impetus to sales. It will affect the citizens of the country, but it will affect the entire market.

Questions about citizenship

What has changed in the investment citizenship program? Is it possible to buy 2 objects for $200,000 for citizenship, as before? If so, under what conditions?

Sergey Volchenkov: Starting from the end of January 2023, changes in the investment citizenship program will really come into force in Turkey. They are more technical than global. Here are the main points that will be changed:

1.If real estate in a house under construction is bought on the basis of a notarial contract of sale, there must be one contract fixing this. This means that two or three apartments for citizenship (that is, with a total cost of $ 400,000) cannot be purchased from different developers and in different projects. Only apartments bought from one developer and even in one residential complex will be counted. Only in this case they can be specified in one contract.  

It is important to note that this does not apply to objects purchased on the secondary market from the owner or on the primary market from the developer (at the final stage of construction), the registration of which takes place in the Tapu and Cadastre Management. In this case, it is still possible to purchase two or more real estate objects that meet the criteria for the investment citizenship program.

2. Real estate purchased under this program should not be owned by Turkish citizens who are directly related to a foreign buyer

3. One object can be used to obtain citizenship only once

4. It is impossible to register the purchased property in shared ownership. That is, to participate in the TAPU program, it is issued to the main applicant. Members of his family (spouse, minor children and dependent parents) are also entitled to obtain passports.

5. Objects that have been sold to a Turkish citizen or a company by a foreigner over the past three years are not suitable for the program.

6. Objects that previously belonged to a Turkish citizen who received a Turkish passport under the investment program are not suitable for the program.

7. The objects belonging to the company, the founder of which is the buyer himself or his direct relatives, as well as the company, which was issued in accordance with paragraph 36 of Law No. 2644, are not suitable for the program. These mainly include companies in which the foreign founder's share is more than 50%, or his rights to manage the company are the main ones.

Is it possible to rent an apartment purchased for citizenship?

Ksenia Baldzhi: You can rent such an apartment, there are no restrictions here. It cannot only be sold. It is possible to sell only 3 years after taking ownership. Then you can resell it, but not to the previous owner, otherwise your citizenship will be revoked. Another point – if a foreign citizen buys your property, then he will no longer be able to re-apply under the program «Citizenship for Investment » on the basis of ownership of this object.

Anastasia Kezik: You can rent real estate purchased for citizenship. Many people do this by purchasing two apartments, live in one and rent the other. The only restriction is that you cannot rent an apartment in which you are registered.  

Is it likely that the investment threshold will be raised again?

Ksenia Baldzhi: It is quite likely, but, according to my forecasts, this will happen after the presidential and parliamentary elections, which will be held in May 2023.

What objects do you recommend to acquire for citizenship today?

Ksenia Baldzhi: I recommend choosing for citizenship those objects that have the maximum cadastral value. In general, this year the trend suggests that the cadastral value will rise, that is, developers began to be pressed so that they could not greatly underestimate the cadastral value, as they did earlier. Accordingly, for now it is worth choosing from ready-made objects that belong to a Turkish citizen or a Turkish legal entity for three or more years (not necessarily one person or company, there may be different owners).

Commercial real estate can also be considered. This is still relevant, because such objects have a fairly high cadastral value in comparison with residential, and they bring a good income, sometimes even guaranteed.

Anastasia Kezik: The new rules have significantly reduced the choice of objects for citizenship. However, there are still offers, you can choose a suitable option. 

Sergey Volchenkov: Our recommendations now are to buy objects whose expert value can be shown above the legal threshold: it is $50,000 or $75,000, respectively.

I want to emphasize that many people are confused and think that this amount should be registered in the TAPU. This is not so – the law requires its fixation in the expert appraisal report of real estate, which must be received BEFORE TAPU registration.

How can the upcoming elections affect the situation on the real estate market?

Ksenia Baldzhi: If the current government holds on, then the real estate market will continue to be active – demand and prices will rise. It is possible, however, to increase the investment levels for obtaining a residence permit and citizenship.

Even if the government changes, a ban on the sale of real estate to foreigners is unlikely. This proposal of the opposition party caused a storm of indignation among their own adherents. A lot of people in this batch are connected with construction, and a significant share of sales is provided by foreigners. Everyone understands that Turkey's economy cannot cope without foreign capital.

Summary

1.The easing of migration policy in Turkey is not expected before the elections. In 2023, it is possible to introduce additional restrictions: raisinginvestment thresholds, closure of districts. Nevertheless, a complete ban on the sale of real estate to foreigners, even if an opposition party comes to power, is unlikely.

2. In the most vulnerable position are those who counted on a residence permit for rent. They are required to confirm the income received outside Turkey (pension or salary), not less than $650 per person (one and a half minimum wages). A certificate from an employer in the Russian Federation (or another country) or from a Pension Fund must be notarized and apostilled. However, even the presence of a certificate of the movement of funds from the Bank of Turkey and a certificate of income does not guarantee the receipt of a tourist residence permit. At the same time, it is almost impossible to challenge your rights in a Turkish court.

3. If you are just going to buy an apartment in Turkey under a residence permit, choose an object more expensive than $75,000 both according to the estimate and according to the cadastre. Today they look only at the estimated value, but it is likely that in the future the cadastral value will be taken into account. In addition, under a residence permit for TAPU, the apartment must be issued to one owner (his family members receive a tourist residence permit. And one more thing – if real estate is purchased under a residence permit, then it is risky to take a lot at the initial stage of construction (the area may be closed under a residence permit, and the rules will change), it is better to prefer an apartment in a house that is being rented soon.

4. Those who are looking for resort real estate and do not count on a residence permit (that is, they do not plan to spend more than 60 + 30 days in Turkey in half a year), you can consider any objects at different stages of construction, including in "closed" areas.

5. There are still enough offers for citizenship on the market, although the choice has narrowed with the introduction of new rules. Several objects can still be bought:

- from the owner on the secondary market, but at the same time he must be a Turkish citizen who has not purchased this property from a foreigner for the last 3 years;

- from different developers, if the transaction is executed immediately through the TAPU and Cadastre Management (as a rule, at the final stage of construction);

- from one developer, if the transaction is executed through a notary, but in this case the objects must be in the same project within the framework of one purchase and sale agreement.

An important point is that real estate for citizenship is issued to one owner, while his direct relatives can also get passports.

6. It is obvious that under the influence of changes, the demand for rent in the regions of Turkey in demand by foreigners will fall. Most likely, this will entail a correction in rates, including for short-term rentals.

The growth of real estate prices will slow down, although a correction is unlikely, since demand is still high among Turkish citizens themselves, among foreigners who already have a residence permit or are ready to consider objects that meet the criteria for a residence permit and citizenship. In addition, many are looking for resort accommodation. 

Sources: Endeksa, TUIK, NTV, Global Property Guide

Photos used: Depositphotos.com