Turkish delights ... and dangers
News Article Date: Thursday 29th of October 2009
“Buyer beware” is the mantra every one hears when embarking upon a property search in Istanbul. Beware of scam artists, crooked lawyers, bureaucratic delays, inaccurate property valuations and restrictions on purchases by foreigners.
Seaside sea change - Oct-24Borderline progress - Oct-10Wealthy isolation - Oct-10Where the crisis hit home - Oct-02Old beats new - Sep-26Blueprints with a green agenda - Sep-19But the Turkish city that famously straddles two continents remains an attractive place to rent or own a home, offering everything from affordable, modern sea-view flats to old wooden houses for renovation in the ancient walled centre.
And prices are as soft and appealing as Turkish delight these days, with many sea-view flats in the capital costing 30 per cent less than before the economic crisis hit last year.
Prices in Turkey as a whole, however, have firmed recently with the perception that the economy is on the mend. The Turkish lira has proven resilient, having dropped to a low of 1.8 against the dollar last winter but then recovering to about 1.5. Inflation meanwhile is well under control, predicted to be about 6 per cent this year, and this price stability has pulled interest rates down which, of course, helps the home mortgage market.
“We’re at the turning point,” says M Bahadir Teker, founder and chief executive of Istanbul Mortgage, a broker. “Interest rates are heading lower and, for the first time in history, we’re at affordability for the middle class. Turkish banks have good liquidity and can extend home loans. We’re going to see growth next year and new development opportunities arising mid-year, so I think now is a good time to buy.”
One recent buyer is Jody Sabral, a British broadcast journalist who avoided a bank loan by using an old Turkish system of owner financing called “sennet” – promissory notes that are torn up one by one as the buyer pays off the balance. However, her experiences of buying a flat in the central district of Beyoglu also highlight some of the trickier passages in the bureaucratic maze.
After looking for about six months, she found a property within her budget but learnt that a new construction next door had disturbed the foundations of the building in which she had been hoping to purchase. An architect friend recommended that she forget the place and her estate agent found another flat in her price range.
“This involved doing all the things I said I’d never do, such as buying a flat that wasn’t finished,” says Sabral. “But I had some savvy Turkish friends who helped the negotiations. My advice to a foreigner wanting to buy in Turkey is: always have a Turkish person with you, preferably one who is already a homeowner.”
For several years foreigners have been prohibited from buying property in Beyoglu, a district on the European side formerly known as Pera, but legislation before the Turkish Parliament is expected to reopen the market to non-Turkish citizens. Municipal authorities instituted the ban in 2006 amid a government campaign to develop the district, including some of its seedier neighbourhoods, such as the slum area of Tarlabasi.
Various plans came and went and meanwhile speculators bought up whole streets of townhouses and office buildings in Tarlabasi and along the waterfront in Karakoy. The official plans never came to fruition and now, with the market stagnant, estate agents and developers want to see if foreign buyers can spark the market back into life.
Sabral got round the law by registering the property in the name of her Turkish partner. “In terms of me being secure in my purchase, he signed a document – a sözlesme – in which he wills the flat to me if he should die and also promises to sign the house over to me if the law changes to allow it,” she says.
Most foreign residents in Istanbul rent while those who buy have traditionally done so in the city centre, on the Princes’ Islands and in districts within the ancient walled city, where the municipality offers tax incentives for restoring old wooden houses. But the most popular – and priciest – neighbourhoods are ones along the Bosphorus, especially chic addresses such as Bebek, Emirgan and Yeniköy.
A view of the strait adds value, and the closer to the water the higher the price. “The more adventurous or bohemian types go for the old city or the centre but our mainstays are still the prime properties in Bebek and other Bosphorus locations,” says Cindy Uriona of estate agency Luxurion. “Professional people want to live by the sea and be close to the main business districts.”
Her most luxurious listing is a historic seaside villa in Kandilli on the Asian shore of the Bosphorus that is priced at €45m (£42m). Known as yali in Turkish, these homes rarely come on to the market. If the 14-bedroom villa is a stretch, Uriona also has a seaside villa on the European side of the strait that is in need of renovation and is listed at $8m (£5m). Expensive properties are often listed in euros or dollars, depending on the whim of the seller.
Uriona acknowledges that not everyone can spend a sultan’s ransom on their home and insists that Istanbul offers good value for money around €500,000. One example is a detached five-bedroom house of 480 square metres on the hillside above the European shore village of Tarabya, listed at $750,000. However, the government’s announcement that it plans to build a third span across the Bosphorus at Tarabya means potential buyers should approach with caution.
Language is only one of the obstacles foreign buyers face; another includes artificially low valuations on title deeds designed to dodge taxes. Indeed, the sales tax is a turn-off in itself; the VAT on flats up to 150 sq metres is only 1 per cent but climbs to 18 per cent for larger properties.
Sabral recommends using a reputable firm and a trustworthy local. “I did my research on the contractor and found that he was a known guy and that he had good connections with the municipality,” she says. “It really pays to check on all the details.”
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