Turkey's real Estate Sector Risks Losing Foreign Buyers
Source: http://www.hurriyetdailynews.com
#turkey #realestate #economy
The increased tax burden and greater complexity of a new real estate tax system in Turkey may discourage foreign investors, reported the Hurrietdailynews.
The new value added tax (VAT) law, which will especially impact small luxury houses located in metropolitan areas, smaller than 150 square meters and licensed by the end of 2013, could intimidate property buyers because of a remarkable price increase. The tax regulation revamps the VAT rate on real estate. With the changes, a tax of 8 percent will be assessed on houses under 150 square meters with a value of US$ 280-560 per square meter, while VAT of 18 percent will be levied on houses worth in excess of US$ 560 per square meter.
The sector had been witnessing an increase in foreign real estate acquisitions since the enactment of a bill removing the condition of reciprocity and eased restrictions on the sale of land and real estate to foreign citizens and firms in May of last year . In May alone foreign real estate acquisitions in Turkey reached US$ 1.1 billion, which is four times the total number in 2011. Nearly 112,300 foreigners have bought 90 thousand properties equivalent to 24.1 million square metres area in only top ten Turkish cities, while Antalya is the leading province where 34,078 properties has been sold.
The new tax will put the Turkish real estate sector in a disadvantageous position against its global rivals. In addition to the price surge, foreign real estate investors might refrain from buying real estate properties because of the difficulty of comprehending the puzzling structure of the new system. Under the new system the tax amounts are determined by the Ministerial Council with regards to six different variables - size in square meters, value of one square meter, luxury house status, license year, the neighborhood and the status of the city (metropolitan or not) - which makes it harder for foreign investors to understand the system.
The new value added tax (VAT) law, which will especially impact small luxury houses located in metropolitan areas, smaller than 150 square meters and licensed by the end of 2013, could intimidate property buyers because of a remarkable price increase. The tax regulation revamps the VAT rate on real estate. With the changes, a tax of 8 percent will be assessed on houses under 150 square meters with a value of US$ 280-560 per square meter, while VAT of 18 percent will be levied on houses worth in excess of US$ 560 per square meter.
The sector had been witnessing an increase in foreign real estate acquisitions since the enactment of a bill removing the condition of reciprocity and eased restrictions on the sale of land and real estate to foreign citizens and firms in May of last year . In May alone foreign real estate acquisitions in Turkey reached US$ 1.1 billion, which is four times the total number in 2011. Nearly 112,300 foreigners have bought 90 thousand properties equivalent to 24.1 million square metres area in only top ten Turkish cities, while Antalya is the leading province where 34,078 properties has been sold.
The new tax will put the Turkish real estate sector in a disadvantageous position against its global rivals. In addition to the price surge, foreign real estate investors might refrain from buying real estate properties because of the difficulty of comprehending the puzzling structure of the new system. Under the new system the tax amounts are determined by the Ministerial Council with regards to six different variables - size in square meters, value of one square meter, luxury house status, license year, the neighborhood and the status of the city (metropolitan or not) - which makes it harder for foreign investors to understand the system.
