An Investors Guide to Turkey

Linking Asia and Europe, Turkey is an aspiring member of the European Union. The country will this year begin formal negotiations for full membership following a period of democratic and economic reforms. However, stormy relations with Greece, especially over Cyprus, remain a difficulty.

Turkey has land borders with Bulgaria, Greece, Syria, Iraq, Iran, Armenia and Georgia and a coastline that borders the Aegean, Mediterranean, and Black seas and the Sea of Marmara. Istanbul, the country's cultural and financial centre (Ankara, Turkey's second largest city is the capital and political centre), sits astride the Straits of Bosporus which provides access into the Black Sea. It has been chosen as the 2010 'European capital of culture'.

The country, which is rich in historical sites dating back to antiquity, offers diversity of peoples and landscapes; the latter ranging from cave dwellings and volcanic vistas to the relatively unspoilt 'blue cruise' options of Turquoise Coast. Most European tourists head for the southern coastline of western Turkey and such places as Marmaris and Bodrum.

The weather in these areas is Mediterranean in nature but property investors should be aware of the risk of earthquake, especially in northern Turkey.

Agriculture is an important part of the Turkish economy, as is tourism, although its fast growing industrial sector includes substantial interests in textiles and clothing. Growth has been erratic in recent years and inflation high (over 10 per cent per annum).

The OECD has described the country as 'at a crossroads'. After hitting the most severe crisis of its recent history in 2000-2001, the economy bounced back and is now among the fastest growing economies in the OECD. A new institutional framework for monetary and fiscal policies as well as for product, labour and financial markets, infrastructure industries, and agricultural support has opened a window of opportunity to escape from the boom and bust cycle of the past, it recently reported.

The relative weakness of the Turkish lira means house prices in the country are low by European standards. However, they have been rising steeply in recent years - up 30 per cent in some areas in 2004, according to some estimates.

Not everybody is permitted to buy property in Turkey. Although the law has been relaxed in recent years, only those nationals from countries affording similar property rights to Turkish nationals may buy property, and then not in military or security zones and not exceeding 30 hectares.

However, a recent decision of Turkey's Constitutional Court has thrown the situation into doubt. It decided that the current law does not provide sufficient guarantees or restrictions and it has given the Government three months to draft new regulations for foreign property purchases. Current owners will not be affected

The transfer process involves application to the local government office for the transfer of ownership. This will check whether or not the property is in a restricted zone and accept of reject the transfer accordingly.

Turkey has a system of land registration. Although notaries are often involved in property transfer this is not a legal requirement - both parties can simply make a mutual declaration at the title deeds registry office. A formal contract is, of course preferable. Each property should have an official title deed detailing its ownership and attaching a photograph of the owner.

It is important to see the Use of building permit so as to check that the property has been constructed according to current earthquake proofing regulations and official plans. As in some other countries, unpaid property taxes attach to the property and not the owner - so purchasers will want to check on the current position regarding taxes.

To make the transfer official and record the price of the property (important for tax purposes) it must be declared to the local registry office by the end of the calendar year in which the transfer has taken place.

Stamp duty of 0.75 per cent of the contract value is payable by both parties to a contract, and there is also a 1.5 per cent fee to be paid to the local title deeds registry office.

Property must be insured against earthquake damage and there is an annual land tax of up to 0.3 per cent and income tax to pay on any capital gains realised within four years of purchase. After that gains are free of tax while inherited real estate is not taxed either.

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