Will Turkey’s new tax deter hungry buyers?Tuesday, February 5, 2013. Ivan Radford @themovechannel
Hunger for Turkey's property has surged in recent years, but new VAT rules announced at the start of 2013 have raised fears that buyer appetites may be curbed. The new tax, which applies to new homes, will increase costs for investors, say experts, with some expecting sales to fall. But other agents predict a shift in interest towards existing homes, pushing demand for resale property even higher.
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Demand for Turkey's property has surged in recent years, but new VAT rules announced at the start of 2013 have raised fears that buyer appetites may be curbed.
The new tax, which applies to homes under 150 square metres in size licensed by the end of 2013, will increase costs for investors, say experts, with some expecting sales to fall as a result.
Ömer Faruk Çelik, chief executive officer of Sinpaş REIT, told the Hürriyet Daily News; "Real estate demand was stuck at around 400,000 sales for several years, and the new tax will pull down the sales even lower."
The regulations replace a size-based rule that taxed properties over 150 square metres at 18 per cent and smaller homes at just 1 per cent. Indeed, the complexity of the system may also deter investors, with fees determined by six variables - size, value per square metre, luxury house status, license year, the neighbourhood and the status of the city.
"Overall this is bad news for the sector," Selim Cakir, an analyst at Turk Ekonomi Bankasi told Bloomberg. "New projects will be impacted negatively."
But others take a far more positive stance.
The changes have already sparked a short-term rush from buyers keen to purchase new property licensed before 2013, while agents expect demand for existing homes to increase, with resales presenting better value for money for buyers.
The growing demand for existing homes should also benefit investors who have already bought Turkish real estate, argue experts, with values increasing significantly over recent years. Indeed, one AFIRE survey recently found that Turkey was the fourth best country in the world for real estate price appreciation, flying up the charts from ninth place.
The new tax also follows a major revision to the country's property system last year, which opened it up to investors outside of the EU for the first time.
Demand has since rocketed upwards, with buyers from the Gulf swarming the market. Now, more than 50 per cent of Iranian buyers plan to invest heavily in Turkey and the UAE over the next two years, according to a new survey, with 15 per cent saying Istanbul is their number one destination of choice.
Indeed, as of December 2012, nearly 112,300 foreigners have bought 90,000 properties in Turkey's top 10 cities, according to the Environment and Urban Planning inventory.
Michael & Alison Rowe, Proprietors of Bluewater Homes, expect that demand from overseas to continue: "Inflation in Turkey is low and the Turkish interest rates are higher than in the UK. This, along with the fact that Turkey still has a growing economy, means that it remains a top choice for purchasing property for investment or for your holiday home."
Speaking exclusively to TheMoveChannel.com, they explain that the new tax has had no effect on their sales yet, with the majority of demand focussing on resale properties.
The cost may not even be passed onto buyers, they suggest:
"The larger developers have said to us that they may absorb all or most of this tax to remain competitive. From a buyer's perspective, this new change could be a useful bargaining tool, as all developers and builders will want to remain competitive."
They conclude: "We do not think that these changes will affect what is already a buoyant market."
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