During the year 2021, the Turkish lira has lost about 46.50% of its value against the dollar and more than 38% against the euro…the two questions that are asked by many people who own real estate in Turkey and who wish to invest in real estate there, are, what is the future of the Turkish lira? and what is the impact of the Turkish lira’s decline on the real estate market?
Before answering the two crucial questions, why are real estate investors choosing turkey to invest in?
After the publishing of The Turkish citizenship through investment program in 2017 till October 2021, About 200.000 houses were owned by foreigners in Turkey.
Why do foreign investors choose Turkey to buy real estate?
There are several reasons for choosing turkey to invest in real estate:
- Reasonable Real Estate Price: Real estate prices in Turkey, in general, are still very competitive in comparison to other countries like (Spain, Portugal, and Greece).
- Turkish Citizenship Opportunity: Foreign nationals who are purchasing real estate in Turkey with a total value of 250,000$ or more have the right to apply for Turkish citizenship for themselves and their families.
- Lower Cost Of Living: According to Numbeo, the Cost of living in Turkey is, on average, 62.70% lower than in the United States, while the rent there, on average, is 84.39% lower than in the United States. And a family of four estimated monthly costs is 12,924TL without rent which is approximately 1200$.
- lower Income / Property Tax: Turkey has an average of 34% income tax which is somewhat above the worldwide average percentage. But the tax on property percentage in Turkey, which is 0.01%, is below the total tax percentage taken in the world.
- Modern Construction Technology Adoption: Many construction firms in Turkey are taking steps to improve construction and infrastructure by adopting technologies.
- Turkey’s Unique Geographical Location: Turkey is the bridge between east and west. And the unique Mediterranean climate makes Turkey one of the most attractive destinations in the world.
And the most important part is…
- Profitable For Investors: The fluctuation in the Turkish currency exchange rate against other currencies like the dollar and euro, increases the desire of foreign buyers and investors to buy or invest in real estate in turkey. After the Central Bank of the Republic of Turkey (CBRT) cut the policy rate by 100 basis points from 16% to 15% yesterday on November 18; the Turkish lira lost 46.50% of its value against the dollar on a yearly basis. Despite the expansion of urbanization in Turkey the demand for real estate is exceeding the supply, this leads to generating a high return on selling and renting.
What is the impact of the Turkish lira on the real estate market?
The big question these days is whether it is a good idea to buy real estate now, especially after the sharp decline of the Turkish lira. Real Estate investment has been one of the most interesting and profitable sectors in recent years, foreign and local investors are generating a higher return on real estate investment in turkey especially in cities like Istanbul, Izmir, Antalya, bursa and etc. And according to Trading Economy, the Housing Index In Turkey Increased To 185.30 Points, Recording The Highest Figure Reached Since 2011.
Foreign investors are the biggest gainers since most of the privileges and incentives granted by the Turkish government to foreign investors to buy real estate in Turkey were linked to the price of the dollar In Turkey, not the Turkish lira itself. The most important of these incentives is the purchase of a quarter-million US dollar property for Turkish citizenship. In this case, the Turkish side will benefit in some way because it is based on foreign investments and foreign currency Understand, it is also considered a substitute for borrowing from the International Monetary Fund.
Turkish lira VS dollar:
Turkish currency Exchange rates fluctuate and change daily. You can check the exchange rate for today by visiting Trading Economy. Historically, the Turkish Lira reached an all-time high of 11.36 in November of 2021.
Turkish lira’s forecast 2022:
According to Trading Economy global macro models and analysts expectations, The Turkish Lira is expected to trade at 10.09 by the end of this quarter 2021. And for 2022, they estimate it to trade at 10.52 in 12 months’ time.
Key facts about Turkish real estate market:
According to Turkish statistical institution, in October 2021:
1- house sales increased by 14.9% compared to the same month of the previous year and became 137 thousand and 401.
2- İstanbul had the highest share with 19.0% and 26 thousand 41 house sales, Ankara and Izmir were the followers of Istanbul respectively.
3- 5 thousand 893 houses were sold to foreigners.
4- House sales to foreigners increased by 12.1% compared to the same month of the previous year and became 5 thousand 893.
5- İstanbul ranked first with 2 thousand 464 sales to foreigners, Analya and Ankara were the followers of Istanbul respectively.
6- the top 3 house buyers nationals are Iran with 265 thousand, Iraq with 926 thousand, Russia with 543 thousand, Germany with 256 thousand, and Kazakhstan with 191 thousand.
Despite the decline of the Turkish lira’s value, turkey is still Turkey is one of the most promising real estate markets in Europe, as well as the Turkish real estate sector, is one of the most significant sectors of the Turkish economy since only the foreign direct investments in the real estate sector constitutes 57 percent of total FDI in 2020.