Ten years ago almost no British people bought a house in Turkey and those who did probably made a mistake, thinking they were buying in Torquay. Frankly, in 1997 buying a house in Turkey at that point was probably not a great idea. The Turkish Lira stood at 185,000 to the £ in 1997. By 2002 it had fallen to 2,146,000 to the £. In other words, if you had bought a £100,000 house in 1997 and sold it in 2002 when you converted the money back into sterling you would have lost 90% of the value of your purchase! Of course the house probably went up in value a bit, but not that much.
In 2003 the Government started to get a grip on this problem. Since that time the Lira has gone up and down but it has been broadly stable to the extent that a couple of years ago the Government was able to delete all of the zeros and launch a new currency – the new Turkish Lira – which now stands at about 2.70 to the £.
This is one of the reasons why the Turkish investment market started in about 2003. Other reasons were the prospect of Turkey joining the EU, increasing numbers of holiday makers visiting Turkey and liking the place and bad performance by the stock exchange leaving investors to look for opportunities elsewhere in the world.
In 2004 when we ran seminars for people interested in buying in Turkey and we asked for a show of hands 95% of the buyers would have been investors. In other words, only 1 in 20 was buying a house because they liked Turkey and either wanted to spend their holidays there or to retire there.
Today less than a third of our clients buying in Turkey are buying primarily for investment. Another third are buying holiday homes that they hope will cover their cost from rental income and capital growth and a third are buying with a view to retirement in Turkey. What? Thousands of British people retiring to Turkey? This is strange but true. They have discovered that Turkey is a delightful place to live. It has a good climate (a little hot in the summer and a little cool in the winter in some places). It has a very rich and varied culture. The new hospitals being built are excellent and if you need private health care it is inexpensive. But above all, you can live very well in Turkey on your standard British pension which, god knows, you cannot do in this country.
This has completely changed the Turkish market. A market which has so many end users is a different but usually more secure investment market than a market where nobody but investors is placing their money.
The second big change is in the property itself. Two things have happened. Firstly (and this always seems to happen) every Tom Dick & Harry thought that selling property in Turkey was dead easy. Thousands of houses were built, often in the wrong place, and the market stalled through over supply. Secondly, the quality of the design and construction has improved immensely. There are now developments that are not rows of identical houses designed using nothing more than the windows cut and paste command. These houses show up the very boring nature of very many of the early developments and, in my view, will make it hard to sell villas in those developments.
The next big change in the Turkish market is going to come in a few months time. At long last mortgages are going to be available not just for foreigners but for Turkish people. Until recently it has been very hard for most people to obtain the finance to buy their own home. A law passed in the Turkish Parliament a few weeks ago will enable 10’s of millions of Turkish people to buy property for the first time and will assist millions of British, German, Scandinavian, Dutch and other foreigners to do the same thing.
We believe that the combination of a hugely increased number of foreign end users – not just British but from all of these other countries, a large number of Turkish people better able to afford a second home and a huge number of Turkish people able, for the first time, to buy their main home, will push prices up quite sharply both on the coast and in the major cities.
This should, perhaps, make investors look at Turkey once again. But make sure that you buy a property in an attractive development that is going to stand the test of time and make sure that the property is legal – i.e. that it has good legal title, a valid construction license and an official certificate permitting habitation of the property.
John Howell is the senior partner of The International Law Partnership
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