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Turkey’s Growing Real Estate Sector: A Lucrative Opportunity for Foreign Investors

JULY 10, 2023

Turkey’s impressive economic growth and successful structural reforms have captured the attention of global investors. In 2022, the European Union ranked Turkey as the fifth most attractive destination for Foreign Direct Investment (FDI) in Europe, a significant leap from its seventh-place position in 2020. With a rising share of European FDI, Turkey stands out as the top choice for foreign investors in emerging Europe, boasting a 20% increase in total FDI projects. As of 2023, Turkey has accumulated a substantial FDI stock of $266 billion and aims to attract $15 billion in investments for the current year, predominantly from European nations. Western countries continue to recognize Turkey’s immense investment potential.

The Role of Public Investments:

Turkey’s development story is closely intertwined with both public and foreign investments. Over the past two decades, public investments, totaling $770 billion in infrastructure between 2002 and 2023, have contributed significantly to the nation’s economy, which now stands at an impressive $1.029 trillion. With approximately 80,000 foreign companies operating within its borders, Turkey’s foreign trade has approached the $700 billion mark.

The Booming Turkish Real Estate Sector:

One of the most significant beneficiaries of Turkey’s economic growth has been its real estate sector. This sector has experienced remarkable momentum, witnessing the annual sale of 1.5 million houses and attracting over 67,000 foreign property buyers each year. Consequently, the total value of the Turkish real estate sector reached nearly $300 billion by 2023. Turkey’s real estate sector has exhibited consistent growth, surpassing that of many developed and developing nations. From its 2020 valuation of $208 billion, the sector’s growth remained steadfast between 2020 and 2022. In 2022 alone, the sector attracted a substantial $6 billion in investments to Turkey.

Table 1: Real Estate Value by Country (Billion Dollar)

Country 2020 2021 2022 Increase (%)
Spain 576.55 585.49 593.18 +2.88
Belgium 233.65 236.25 256.40 +9.73
Turkey 208.43 224.81 252.61 +21.19
New Zealand 90.24 94.17 105.60 +17.02
Chile 90.89 92.56 100.92 +11.03
Portugal 92.75 95.08 99.66 +7.45

Source: European Public Real Estate Association (EPRA)

Reasons to Invest in Turkish Real Estate:

Investing in Turkey’s real estate sector offers several compelling advantages, including affordable prices, potential returns, and favorable tax policies on property purchases. Compared to other European countries, Turkey boasts lower rental taxes. The recent surge in real estate prices has further enhanced the sector’s appeal, attracting heightened interest from investors. Anticipating investments exceeding $5 billion in 2023, the sector is shifting towards investment funds. Mutual funds, a burgeoning field in Turkey, are favored for their ability to offer enhanced protection against risks.

Table 2: Real Estate Investment Comparison by Country (%)

Country Rental Income Tax Capital Gains Tax Price to Rent Ratio House Price Increase 5 Years Buy/Sell Costs
Turkey 17.91 0.00 18 Years 467.26 10.00
Portugal 28.00 28.00 19 Years 88.39 11.00
Czech 15.00 15.00 26 Years 83.54 6.00
Netherlands 13.42 1.62 20 Years 63.13 8.25
USA 30.00 15.00 16 Years 54.46 8.31
Austria 22.97 30.00 31 Years 44.58 10.55
Greece 22.00 15.00 18 Years 40.52 8.50
UK 20.00 28.00 16 Years 29.04 10.03
France 10.00 33.30 25 Years 28.13 13.50

Source: Global Property Guide (GPG)

Conclusion:

Turkey’s burgeoning real estate sector presents an enticing opportunity for foreign investors, offering a combination of affordability, potential returns, and favorable tax policies. With its consistent growth, the sector continues to attract significant investment. As Turkey remains a top destination for FDI in Europe, the real estate market’s potential for growth and profitability remains highly promising for investors seeking to diversify their portfolios.

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