Global crisis creates housing bargains in Istanbul
Istanbul continues to attract foreigners who want to wake up to views of the Bosporus and live in a city half as old as time and still enjoy world-class concerts and performances like the one to be held in February by the acclaimed cellist, Yo-Yo Ma.
Inside one square kilometer you can enter so many different worlds, from an Italian film series to a reggae bar to a seminar on Middle East politics at the Swedish Consulate, said Jo Malcolm, a Scotswoman who moved to İstanbul last year from her home in Italy. She was speaking of the city center district of Beyoğlu. Most foreign residents here rent, and landlords have always preferred the hard currency of a Japanese, Italian or American to the unpredictable lira paid by Turkish tenants. Over the years, however, there has been a steady trickle of foreigners willing to buy property. They have had to negotiate a bureaucratic maze, deal with language problems and often bring a suitcase full of cash to complete the purchase.
Many of the challenges remain the same now, though real estate spending by foreigners has increased threefold since 2003, after a single-party government brought political stability and its reforms brought economic stability. Now the global financial crisis has curtailed much of the buying and brought bargains in its wake.
"Rentals continue, but we're experiencing an incredible slowdown in sales, a stop in fact," said İbrahim Gündüz, an estate agent in Beşiktaş. "Prices in the city center are soft, with even sea view flats down by 20 percent this fall, but that's nothing compared to the suburbs, where prices have dropped 40 or even 50 percent since the crisis hit."
İstanbul represents only 12 percent of the total market, with most foreign real estate buyers flocking to the Mediterranean beaches between Antalya and Bodrum. Of some 78,000 foreign homeowners in Turkey, UK citizens are in the lead, closely followed by Germans, many of whom of course are German-born Turks.
"There are different models of purchasing to match different return expectations, whether the individual is buying to invest, as a holiday home or for retirement," said Yusuf Akuğur, managing partner of BPI Real Estate Investment and Development Inc. in İstanbul. "For example, Germans like to buy land, and Irish like to collect rents, while the British just want to own a home for their own use."
The second-home market is generally overlooked by Turkish developers, but the downward trend in the US, Europe and other developed markets forces Turkey to be more competitive, according to Akuğur. "Turkey is much cheaper than Spain, and 2,000 euros per square meter gets you a fantastic property here," he said. "The share of EU buyers is declining and that of Gulf country buyers is on the rise, and right now cash is king."
The developer cited several problems in the administration of the real estate market in Turkey. One of the most challenging impediments to high-end sales is the disproportionate value-added tax, which vaults to 18 percent on flats over 200 square meters, though the VAT on flats up to that size is only 1 percent.
Book versus market value
Another problem for foreigners is to reconcile conflicting book and market values, as most Turks record a sale price much lower than the actual price in order to avoid taxes.
"Ideally foreigners wouldn't need a mediator to help them buy a house, but since they do, it pays to choose a consultant or adviser with care," said Ali Çetin Önder, head of appraisal agency TADEM and also chairman of the national association of appraisers.
Foreign homeowners remain a distinct minority in this city of more than 12 million people, with only 6,000 of them if you exclude the Greeks who formerly had Turkish citizenship, said Önder.
Turkey's Parliament last summer passed new legislation regulating the sale of property to foreigners, which developers hoped would help lift the overall market. All such sales had been impossible since March 2008, when Parliament decided to clarify restrictions on foreigners buying land close to military installations. There had been an unwritten restriction on the sale of flats in Beyoğlu, officials fearing a reversal of the decades-long Turkification of the area, but these days foreigners are once more being allowed to register title deeds in the city center.
Throughout Turkey, foreigners are now allowed to buy up to 2.5 hectares of land, except within specially designated zones surrounding army bases and the like, and also are forbidden to buy prime agricultural land without a special permit from the Prime Ministry.
Eternal pull of the sea
The restrictions mean little to those attracted to İstanbul, who love the views, the old buildings. For an ancient and venerable city, İstanbul has a curious lack of fine old buildings, perhaps because, like the Etruscans, the people here used wood more than stone, and wood, even if it doesn't burn first, will eventually flake and crumble.
Newcomers slipped new and graceless buildings into neighborhoods like Bebek and Cihangir, but the views remain. Foreigners and Turks both love the sea views that İstanbul offers, whether looking at the shipping on the Bosporus or out across the Marmara Sea to the Princes' Islands.
Whatever the view, cash is king today, and it pays to shop around. You can get a sea view for less on the Asian side of İstanbul, but then you have to cross the water to reach the city center. A boat ride is easy, but if you take a car you can spend up to two hours just crossing the bridge on a busy morning.
Cash is king
Yet the prices asked these days vary wildly, from $2 million for a deluxe flat in a very ordinary development, without a view, to 1 million euros for a Bosporus flat without any balcony or terrace.
One of the best values found in a troll this month sits perched on the hillside between Cihangir and Tophane, a grand old apartment with incomparable sea views for around 440,000 euros (TL 875,000). For that money you get three bedrooms, central heating and a terrace overlooking one of the most celebrated views in the world, across the mouth of the Bosporus and Golden Horn to the timeless skyline of the old quarter, where the spire of Topkapı Palace rises next to Hagia Sophia and the Blue Mosque.
"Second home financing tends to be through mortgages," said M. Bahadır Teker, who left the Capital Markets Board (SPK) in Ankara a few years ago to set up Turkey's first non-bank mortgage company, İstanbul Mortgage. "A typical UK citizen could pay cash from savings, get a mortgage on the new property or, most likely, take a mortgage on their primary residence to finance the second home. The third option is best but is practically wiped out by the current crisis."
Thus cash is king, for the credit squeeze affects the entire market.
Housing Bargains in Istanbul - Article taken from Todays Zaman 17th Jan
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