Posted on 14 February 2011
Istanbul attracts foreign home buyers despite crisis
For generations, Turks have valued property ownership as a hedge against inflation, so title deed registration is clear and factual.
“Buyer beware” is the mantra everyone hears when embarking upon a property search in Turkey.
Use a professional agent and lawyer.
But the Turkish city that famously straddles two continents remains a compelling place to rent or own a home, offering everything from affordable, modern sea-view flats to old wooden houses ripe for renovation in the ancient walled center. Spending on real estate by non-Turks in Turkey as a whole has tripled since 2002, albeit from a very low base.
One painful impediment to high-end sales in Turkey is the disproportionate value-added tax (KDV), which vaults to 18 percent on flats over 150 square meters, though the KDV on flats up to that size is only 1 percent.
Istanbul represents only 12 percent of the total market in Turkey, says Yusuf Akugur, managing partner of in Istanbul. Of some 78,000 foreign homeowners in Turkey, UK citizens are in the lead, closely followed by Germans, many of whom, of course, are German-born Turks.
Melina Mikhailova, a native of Florence, moved to the Cihangir neighborhood a decade ago and points to only two serious problems: the discovery of a Byzantine-era cistern near her flat, which led to years of disruptive archaeological excavation, and the threat of earthquakes, since the city sits atop a meeting of seismic fault lines. “The whole reason I moved here, though, is that it’s not a jewel box, but a real, vibrant city,” says Mikhailova. “In that I have not been disappointed.”
The city’s property market had a period of strong growth from 2002, when the election of a single-party government ushered in political and economic stability, up until a few years ago, when house prices leveled off. It was just regaining momentum when the global economic crisis hit, and although property values in the city center have recently stabilized, they are still down 20-30 percent from a year ago. That may be good news for bargain-hunters from abroad, however.
The Turkish lira may well remain relatively resilient in the face of global and domestic uncertainties. Analysts project a range of 1.50-1.60 for the TL-US$ rate this summer. The lira now trades at 1.50 to the dollar, 2.00 to the euro and 2.44 against sterling.
Two years ago, the Turkish government clarified rules on foreign ownership, allowing the purchase of up to 2.5 hectares of land except prime agricultural and military zone land.
“The price decrease has stopped in both commercial and residential, and if the US housing market stabilizes mid-year, then it’s time to invest in Turkey,” says M. Bahadir Teker, founder and chief executive of IM. “The coming two or three years should offer very good returns.”
Historically, holiday-home buyers, including Russians, Germans, French, Kuwaitis and particularly Britons, have gravitated to the Mediterranean beaches between Antalya and Bodrum. But the result has been the creation of tourist enclaves with little local flavor. Istanbul, by contrast, is decidedly Turkish, with a mostly native population of 12 million people.
Turks don’t think of Istanbul as a place for a holiday home, but people who get their energy from cities love this raw city. Pat Swain, a New York photographer working on a project here, says: “It’s so much more real than Soho, which is now full of phony hipsters. Here you have the old urban scene of real people working with their hands in cellar workshops; it’s not gentrified to death.”
Profit or pleasure
The top residential areas in the city are the center, all along the Bosporus and on the Princes’ Islands and, increasingly, districts in the ancient walled city, where the municipality offers tax incentives for restoring historic homes. “Our bread and butter is still the prime properties in Bebek and other Bosporus locations, This is where most foreigners who live and work in the city want to be.”
At the top end of the market, she is currently marketing a seaside villa in Çengelköy, on the Asian shore of the Bosporus, listed at $10 million (TL 15 million). “It faces south, and that’s an important factor in Istanbul, which is a city of great light and natural beauty,” she says. She also has less expensive flats in tower blocks with sea views, but warns anyone buying in a development not directly on the water to make sure another won’t be built in front of their own.
Teker advises clients interested in capital growth to “stay inside the old city, inside Fatih and Eminönü,” where local officials are encouraging the rehabilitation of everything from individual buildings to entire neighborhoods and properties still go for a song. But “for living, it’s whatever suits you best,” he says. “Property on both sides of the Bosporus has always been good.” Other options currently on offer include a restored, late 19th-century, five-story townhouse on the hillside above Besiktas, listed at TL 1 million.
A five-bedroom villa of 420 square meters in a newer development out by the Black Sea is on the market for TL 1 million, while a five-bedroom flat in Besiktas is listed at a slightly lower price but with a third less space. The latter offers a view of the bridge and Bosporus as compensation.
Istanbul remains a complicated market. Mortgages are a relatively new concept so terms are typically 10-15 years, while interest rates remain high; some tax-fearing vendors insist on being paid in cash anyway, not all estate agents speak English and deeds often contain dodgy valuations.
“It’s different from mature markets; buying property is not a straightforward process,” acknowledges Idil Hanzadi, director of research in Turkey. “But in some ways Istanbul should be better than Eastern Europe. For example, property ownership is so important here and has been perceived as a hedge against inflation for generations, so the title deed registration is clear and factual. We just advise foreigners to work with a reputable firm or agent.”
People who fall in love with the city are prepared to run the obstacle course of language and cultural differences to buy property here. “After all,” says Uriona, “the world has only one Bosporus.”
01 August 2009 Source Zaman Today (Abridged)