Short Term Investment Strategy
Key Opportunity
As an aspiring member of the EU, Turkey attracts investors looking to profit from a success story in the making. Shrewd buyers are acting fast in this emerging market, while the country undergoes rapid growth and reforms to bring it up to the standards required for eventual EU membership. Turkey is currently among the top ten destinations for those looking to invest in overseas property, according some independent property advisors.
The Turkish government is addressing its enormous housing deficit. Currently this stands at 600,000 houses in Turkey's main cities (and around 250,000 in Istanbul itself) and the government aims to raise the standard of living and foreign investment in city property such as Istanbul is regarded as a positive step towards that goal. With increased economic activity and demand well outstripping supply, it is clear that short term investment in carefully selected Turkish property will bring significant returns - last year alone prices in some popular seaside resorts rose by as much as 52% and the country's capital growth rate ranged from 25% to 40 %.
With strong GDP growth at 5% in 2006 and as a member of the G20, Turkey already figures 22nd amongst the economic giants of the world. A dynamic emerging market equipped with a well-developed infrastructure, Turkey is working hard to accelerate performance and foreign direct investment (currently circa USD 1 billion per annum), which is expected to increase dramatically over the coming years with the implementation of further economic and judicial reforms.
Turkey is home to a thriving and rapidly growing tourist industry and boasts an increasing amount of budget flights to encourage foreign visitors and buyers alike. Off-plan beach and golf property in and around the many popular coastal resorts generates much foreign interest and is a firm favourite amongst short term investors looking for reliably high returns on investment.
Timescale
Investors in Turkish off-plan developments factor in between 18 and 24 months for construction from reservation to completion stages. Short term investors normally look to profit from a carefully selected, promising market, selling on their unit to mid or long term investors approximately 14 to18 months after making their initial reservation, regardless of whether or not the project is yet completed.
Payment terms will vary; good projects will often offer terms of around 30% deposit with a further stage payment during construction and the balance payable upon completion. This allows short term investors to operate their strategy with minimum capital outlay. Of course, the earlier the investment is made, the greater the investment returns. As importantly by entering the project at the earliest possible stage, investors get the best choice of units which will always be first to attract buyers in the future.
Level of Complexity
Short term strategies offer the lowest level of complexity as the purchase has not yet been officially made; therefore, no property taxes or maintenance or management charges are due. This is a simple capital investment, often with no need to proceed to Purchase Contract, or make any mortgage finance arrangements. Remember to check with the developer if there are any charges made to "flip", or reassign your contract, and at what stage you are permitted to do so, before you proceed
Risk Assessment
All investors must carefully assess the particular project and units in which they wish to invest. In many cases a wide range of other projects will be under construction and a choice will need to be made. A decision will need to be based on how a particular development or project will outshine its competitors in terms of appearance, location, on-site facilities and the unit itself. Investors will also need to consider issues such as the number of other units available within the particular development, predicted demand as well as competition for the type of property they wish to invest in.
To curb risk, a short-term investor should normally seek to buy the best possible unit, ie. a corner unit, a penthouse or ground floor unit with a private garden, which will always sell in preference to a standard first floor unit.
Investors need to be clear how their exit strategy is to run. How will the unit be marketed and by whom? How much will the selling agents charge in commission? Should a buyer not be found prior to completion of the property, investors must be confident they can cover payment to completion of the unit and adapt their strategy if necessary. TurkeyRealEstate.ORG offers a substantial Investor Care package, which adds significantly to investors' chances of a successful exit.
Short term "flip" investments are undoubtedly more risky than longer term strategies, but, with careful research and planning in place, off-plan purchase in well located Portuguese projects offers a sound investment with lucrative returns.
Return
Turkish property offers high capital appreciation of up to 40% per annum, depending on location. Shrewd investors have the opportunity to reach the highest figures by selecting prime developments in cities or resorts at pre-release pricing levels, allowing them to invest at below market value.
By reserving at pre-release stage, investors profit from discounted prices and, in many cases, these are subject to successful planning applications, allowing for additional pricing uplift. Reservations on this type of TurkeyRealEstate.ORG recommended project allow for full refunds if necessary and secure escrow accounts are in place to protect investors' funds. An earlier than normal reservation of course affords the maximum possible returns on investment on any given project.
Financing
The short term investment strategy is purely based on capital outlay as mortgages cannot generally be raised against property that is not yet built. In order to cover all eventualities, investors MUST be confident they can complete the purchase if necessary, even if using a buy to flip strategy. Developer's mortgages are sometimes available to fund around 80% of the purchase price.
If necessary, Turkey Real Estate .ORG can help its investors arrange equity release from their existing property to fund the initial capital payments, which could later be covered by a mortgage once the construction period is completed.
The imminent general introduction of the Turkish mortgages will doubtless increase the desirability and pricing levels of Turkish property in the near future. For now, finance can also be raised by overseas mortgage brokers, normally to a value of 80% of the property price.
Taxation
Purchasing a property and then re-selling prior to completion is a tax-efficient way to invest as it allows buyers in Turkey to avoid any property transfer taxes and side-steps many taxes, including capital gains tax, should they choose to sell on the contract prior to project completion.
we always recommend research into any double taxation treaties in place between Turkey and the investor's country of residence. |
General Factors |
