The Sunday Times 05.08

It may be a popular country with investors but when Turkey threatened to bar overseas buyers...
(May 2008)

It may be a popular country with investors but when Turkey threatened to bar overseas buyers, the move underlined the precarious nature of the country, finds Siobhan Maguire

Last month Turkey sent an unexpected Shockwave through the Irish investing world when it announced it would outlaw foreign property ownership while the government struggled to draw up new legislation over title deeds. The idea was dropped after a couple of weeks, but it was nevertheless seen as a stark warning to overseas investors, and the latest on a growing list of problems for Irish buyers in Turkey.

Those problems include the rapid growth of fundamentalism, civil unrest, human-rights abuses and the country's floundering chances of EU membership. All mean that Turkey seems to be becoming an increasingly risky place to invest.

Cheap prices and improved air access, however, meant last week's Sunday Times survey of overseas property hot spots showed Turkey entering the top 10 destinations for Irish purchasers for the first time, at No 8.

For buyers such as Shane Harkin, from Athy in Co Kildare, the Turkish government's threats cause little concern. A few years ago, Harkin first bought in Mahmutlar, a small suburb outside Alanya, a popular tourist resort in the south of the country. In 2006, he sold the two-bedroom apartment, which had cost €40,000, and upgraded to a penthouse in the same resort. Bought for €150,000 from the same developer as his first place, his new four-bed property generates monthly rents of almost €500. Harkin, his wife, Lisa, and their five-year-old daughter, Laura, also take holidays there for a couple of weeks a year.

"My parents were there about 12 years ago, and looked at retiring out there," he says. "They bought a small place and that encouraged me to do the same. I only advertise my property to the British market and have been renting the past two summers from June to September at weekly rates of €412 to €475. This covers day-to-day costs of running the property, but not the mortgage."

The temporary suspension on foreign ownership of land put Turkey and its often-volatile history at the forefront of discussion boards for investors once again.

"In some areas you have to apply for military permission if buying in various sensitive locations for up to three months or longer before you can become owner," says Tom McGrath, a Dublin solicitor whose firm deals with the overseas market.

"The sooner the market is regulated, the better."

For buyers waiting to complete on a property, it was a worrying time last month as they fretted that it was too late to pull out of their contracts. Others hoping to buy had their dreams dashed and turned their attention to other markets.

One worried Sunday Times reader found himself in limbo after buying an off-plan apartment in a development in Gumusluk, Bodrum, only to discover that the land titles to his property had been transferred to a Turkish bank on a sale and leaseback arrangement. The development, due for completion this month, is now not expected until early 2009, due to insufficient work on the site.

"I paid €126,000, but I could lose the place if it turns out that the plot I thought I was buying now belongs to someone else," he says. "My Turkish lawyer thinks the transference of titles is in breach of contract, and the Irish agent I bought the place from is saying there is a risk the Turkish developers will not complete the place."



Agents insist the title amendments issue will have no impact on the majority of Irish buyers, who either bought or are buying in officially zoned areas in and around Turkish cities, towns and resorts. The amendments, they say, would only affect anybody buying rural land from a Turkish firm.

Campaigners say the brief drive against foreigners is merely a short-lived inconvenience when compared with some of the larger issues in Turkey.

Just last week, Turkish riot police were condemned for using excessive force during a May Day demonstration in Istanbul. That same day, the Turkish government pushed through changes to an archaic law limiting free speech, following pressure from the European parliament. Article 301 of the penal code had made it a crime to "insult Turkishness". The change now makes it a crime to insult the Turkish nation and cuts the maximum prison sentence from three years to two.

There is also a school of thought that certain fundamentalist sectors are vying for the introduction of Sharia or an Islamic state, which would further close the country to foreigners.

"Every country has different rules and regulations, but one thing overrides them all and that is different cultures," says McGrath. "You need local knowledge, and this property issue in Turkey is an example of where that knowledge is needed.

"We have clients we look after from the beginning before they sign contracts and hand over money. Then we have the people who come to us in tears: they've been duped out of their money, made to pay vast sums and sign things they don't know."

In spite of domestic problems, Turkey's property market remains buoyant and continues to be fuelled by buyers and investors.

"I would be more put off by certain Turkish locations or developers than the temporary suspension of a law, because buyers have been burned in the past," says Harkin. "Turkey has been similar to Spain, where local politicians got involved and gave assurances that developments had planning permission when they had none. From what I know, the Turkish government is actually cracking down on corruption because they don't want to get a name for it."

Some agents will admit that Turkey is not without its faults, and the buying process can be an arduous and drawn-out one, with paperwork delays and banking difficulties.

Michael Johns, director of The Right Move Abroad, says: "I've got clients buying property and sending money to a Turkish developer's bank account on the first of the month, but it could be more than 20 days before that developer will issue a receipt. The Turkish system needs to be brought up to a level with the rest of the Europe. However, there are good reasons why people buy there. It is a cosmopolitan country, easy to get to and cheap."