Changes in the Citizenship by Investment program and their impact on the Turkish real estate market

During the entire existence of the Turkish Citizenship in Exchange for Investment program, launched in 2018, one important change was made to it – a year later, the minimum entry threshold was reduced four times and amounted to 250 thousand US dollars. Another change to the program is now taking effect that could also impact the local real estate market.

Starting from June 13, in order to qualify for a Turkish passport, it will be necessary to buy real estate in Turkey in the amount of 400 thousand USD. In addition, the requirements for foreigners who first plan to obtain a residence permit in Turkey are being tightened, and only then, after five years, apply for citizenship according to the standard scheme.

When the investment minimum was reduced to 250 thousand in 2019, there was a sharp increase in demand for residential and commercial real estate in Turkey from citizens of the post-Soviet countries and the Middle East. By 2020, over five thousand foreigners took advantage of this opportunity, concluding purchase and sale transactions totaling about 1.5 billion US dollars, and Russians were among the most active buyers.

According to the Turkish Institute of Statistics, in April 2022, real estate sales increased by almost 40%, which is explained by increased demand from foreign investors – primarily citizens of the Russian Federation. In April, they acquired over 1,100 properties (a month earlier this figure did not reach 550) and for the first time became leaders in the total amount of investments in real estate. This is largely explained by the fact that, due to the imposed sanctions, it has become more difficult for Russians to purchase real estate in EU countries, with which there is now no direct communication.

The geography of home purchases by Russian citizens has also changed. If earlier they gave preference to Antalya, now Istanbul has taken first place. Not the least role in this was played by the fact that when a property is included in the program, its cadastral value is taken into account, which can be significantly less than the market value.

This situation is typical for Antalya, Alanya and other resort regions on the coast, while for about 90% of properties located in Istanbul, the cadastral and market values ​​do not differ too much or even have the same value. As a result, it turned out that for an object with a cadastral value of 250 thousand USD, located in popular seaside resorts, one had to pay almost twice as much. And this is after the Turkish government decided in January 2022 to carry out all payments in US dollars or other hard currencies, rather than in the Turkish lira, the value of which had fallen rapidly over the previous months.

As for a residence permit in Turkey for real estate buyers, if previously there was no minimum price threshold as such, it is now set at 75 thousand US dollars for 30 large cities (Istanbul, Ankara, Antalya, Izmir) and 55 thousand for small towns . This may reduce the proportion of clients who have the means to purchase budget options, although overall this change is unlikely to affect the state of the Turkish real estate market.

The popularity of the Turkish Citizenship by Investment program should also remain at the same level, since even after raising the price threshold, purchasing real estate continues to be a more popular option than other methods. The latter include starting a business, purchasing securities and government bonds, as well as deposits in banks or investment funds, for which the minimum amount is 500 thousand US dollars.

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