Turkish property to be available to Gulf buyers

A proposed law will enable foreigners, including those in the Arab world, to enter the country's housing market. And the timing could not be better.

As demand grows, Turkey's property developers are flocking to centrally-located but rundown areas such as this one in Istanbul. Kerem Uzel / Bloomberg News

The Turkish property market currently stands on the edge of the biggest change since the Turkish government allowed foreign buyers, with some restrictions, to enter the market in 2002.

In 2005, many of these restrictions were lifted, allowing foreign homebuyers the freedom to purchase property almost anywhere in Turkey, the exception including municipalities with fewer than 2,000 inhabitants (Article 87 of the Villages Act) and military zones.

However, the 2002 change in the law allowed foreign buying only on a reciprocity basis, which meant they could buy property in Turkey only if their country of residence allowed a Turkish buyer to purchase property in that country. In other words, if a Turk can't buy in your country, you can't buy in Turkey. This is set to change, as the Turkish parliament is discussing a bill that would effectively abolish the reciprocity law and allow all foreigners to purchase in Turkey.

This change will have a big impact on purchasers from the Arab world. Because of the reciprocity law, citizens of most Arab countries, including the UAE, Qatar, Saudi Arabia, Oman, Iraq and Kuwait, are not allowed to buy in Turkey, and this has been a big hindrance to foreign investment - at a time when Turkey is becoming a more popular destination for Arab visitors.

The Arab world's romance with Turkey has only strengthened since the start of the Arab Spring.

Arabs traditionally spend their holidays and make property investments in other Arab or Muslim countries, but the Arab Spring made some of those countries unsafe. The turbulence of the unrest is still being felt. Of the 17 countries where protests took pace, serious political change occurred in just four, and unrest is simmering in some areas.

Libya is still suffering from tribal strife, and reconstruction is a long way off. In Egypt, protests are still going on to remove the military from government. The British government still warns visitors to avoid crowds in Egypt.

This has led to a strong increase in Arab tourism to Turkey. The Turkish prime minister, Recep Tayyip Erdogan, also recently agreed visa-free travel deals with Lebanon, Syria, Jordan and Libya as part of a campaign to increase Turkish trade globally and to raise its influence in the Arab world. So the removal of the reciprocity clause from the Turkish property law is expected to fuel Arab property investments. The changes could not come at a better time from Turkey's perspective.

When property prices in many markets are still suppressed because of the global financial crisis, home prices in Turkey increased by 6.3 per cent last year, according to the Knight Frank Global Market Index. Only in Hong Kong and France did property prices grow as fast.

Buyers from the UAE, Saudi Arabia and Qatar are expected to spend up to US$10 billion (Dh367.31bn) when the restrictions are removed, according to some estimates. Sales are expected to increase by 20 per cent.

There is more to the proposed property bill than just dropping the law of reciprocity. As well as allowing foreign buyers from new countries, foreigners will be able to buy more property as well. Currently, a buyer is restricted to buying one 2.5 hectare plot without the need for special permission from local authorities.

Under the new law, the maximum plot size will be 30 ha.

David Walker is the director of Spot Blue, a British firm specialising in Turkish property, and vice chairman of the Turkish British Chamber of Commerce and Industry