Home sales to foreigners are at the lowest level in two and a half years: is there an implicit embargo?

Demand skyrocketed with cheap interest loans granted by public banks during the epidemic year, then citizens continued their demand for real estate to protect their existence against inflation, interest rates decreased due to lax monetary policy and successive campaigns ; The granting of citizenship with money, the growing Russian demand after the war in Ukraine and the deepening of the real estate crisis…

It has reached the point that the owner and the tenants cannot agree on the rental price and the situation leads to a murder.

One of the reasons for the collapse of the real estate market is the sale of homes to foreigners.

However, in recent months there has been a notable decrease in these sales.

Finally, in October, home sales to foreigners fell to the lowest level in the last two and a half years.

SALES ARE AT THE LOWEST LEVEL SINCE JUNE 2020

According to data from the Turkish Statistical Institute (TUIK), the drop in home sales to foreigners, which was limited to 0.6 percent in January, jumped to 27 percent in February after the earthquakes centered on Kahramanmaraş; In September it continued to fall sharply with 42 percent.

TurkStat data announced the day before revealed that this contraction has deepened.

Consequently, home sales to foreigners decreased by 53 percent year-on-year in October, falling to 2,535. This means that home sales to foreigners have fallen to the lowest level since June 2020.

In the first 10 months of the year, sales decreased 44.4 percent compared to the same period of the previous year and fell to 30,599 units.

The share of these sales in total sales has decreased 1.6 points since the beginning of the year. The share of home sales to foreigners, which was 4.3 percent in total sales in January 2023, decreased to 2.7 percent in October.

In October, the Saudis bought 70 houses, the Afghans bought 51 houses, and the Palestinians bought 27 houses. (Source: TURKSTAT)

SALES IN ISTANBUL ARE AT THE END OF 2.5 YEARS

The city with the biggest decline in home sales to foreigners was Istanbul.

According to TÜİK data, housing sales to foreigners in Istanbul have fallen to the lowest level since June 2020.

Consequently, housing sales to foreigners in Istanbul fell below 1,000 units in October and fell to 758 houses.

The last time it fell below this level was in June 2020; That month, 730 houses were sold to foreigners.

LOWER PURCHASE FROM RUSSIANS IN 1.5 YEARS AND FROM IRANIS IN 2.5 YEARS

If analyzed by nationality, home sales to Russians in the last year and a half are; Home sales to Iranians are seen to have fallen to the lowest level in the last two and a half years.

According to figures compiled from TÜİK data, Russians who bought 9,396 houses in Turkey at the beginning of the year reduced their purchases to 713 houses in October. This is the lowest level since March 2022.

Iranians, who bought 3,833 houses in Turkey earlier this year, reduced their purchases to 235 houses in October. This level means the lowest level of the last 31 months since May 2021.

THE LOWER RESIDENCE LIMIT HAS BEEN INCREASED TO 200 THOUSAND DOLLARS

So, what are the reasons for the sharp decline in home sales to foreigners?

Representatives of the sector indicated that one of the reasons is due to the ‘increase in the lower limit for the sale of residential homes to foreigners’.

According to the information we received from the Directorate of Immigration Management, As of October 16, 2023, the lower limit for the purchase of real estate by foreigners in order to obtain a residence permit was increased from 75 thousand dollars to 200 thousand dollars.

If the deed transactions occurred between April 26, 2022 and October 16, 2023, the sale price of the deed should have been $50,000 in small cities and $75,000 in metropolitan cities.

In addition, it was decided to increase the real estate value to be purchased for the Turkish citizenship application from 250 thousand dollars to 400 thousand dollars in 2022.

According to representatives of the real estate sector, this situation is one of the reasons for the decline in home sales to foreigners.

Source: TURKSTAT

‘A COVERT EMBARGO IS BEING IMPLEMENTED’

Speaking to Sozcu.com.tr, real estate appraisal expert Ahmet Büyükduman said: He pointed out that the drop in sales is due to a “veiled closure of the market” for foreigners.

“It is not said openly, but it is a covert closure of the market for foreigners,” Büyükduman said, adding: “Neighborhoods are closed to residence, residence permits are not easily granted. The amount of real estate that must be acquired for residency has also increased from $75,000 to $200,000. “In other words, an implicit embargo is being implemented against foreigners through administrative measures,” he stated.

EARTHQUAKE AND DECREASE IN CURRENCY ATTRACTION ALSO AFFECT

About the topic Real estate appraisal expert Celal Erdoğdu provided information to sozcu.com.tr He made the following assessment of the reasons for the decline:

“The main reason why foreigners increased their home purchases was that the lower limit decreased from 1 million dollars to 250 thousand dollars. Purchases by foreigners, which have increased progressively during this period, reached 67,000 homes last year.

The fall began in January, then began to increase with the earthquake we experienced in February, and external purchases continued to fall due to the increase in the minimum amount to 400 thousand dollars in July.

The reasons for the decline can be explained because foreigners satisfy these needs by purchasing the housing and citizenship they need.

The subsequent resurgence of earthquake risk can be interpreted as Turkey losing its attractiveness in the eyes of investors.

Another factor may be that, as a result of the decline in housing prices in dollar terms, it is no longer attractive for foreign investors to make money on housing in foreign currency.”