Russians have been leading among foreign buyers of real estate in Turkey for half a year

Since November 2022, Russians have remained the undisputed leaders in terms of the number of purchased properties in Turkey against the backdrop of a general decline in sales to foreigners over the past five months. In May, citizens of the Russian Federation purchased 991 residential properties (houses and apartments) compared to 817 in April. In second place are Iranians (503 objects), in third place are Ukrainians (175). This follows from the monthly data published on June 15 by the Turkish Institute of Statistics (Turkstat).

The Russians began to lead among buyers of Turkish real estate in December last year. Prior to this, Russian citizens were in third place in terms of the number of purchased objects, and the Iranians were the leaders, although in general, Russians turned out to be the largest buyers of houses and apartments, and by the end of 2022 – 16,312 objects. In December 2022, the Russians bought 2403 objects, in January 2023 – 1557, in February – 1183, in March – 1157.

Overall, property sales to foreigners have consistently fallen every month this year. In January-May 2023, they decreased by 37.8% compared to the same period of the previous year and amounted to 16,650 objects. In May, sales fell by 46.9% compared to the same month last year and amounted to 3167 objects, in April – by 60.3% (2557), in March – by 38.7% (3415), in February – by 27% (3350), and in January – only by 0.6% (4161). In many ways, the decline was due to the pre-election situation. At the end of February of this year, Erdogan’s main rival, Kemal Kılıçdaroglu, promised to ban the sale of real estate to foreigners for five years if he came to power. The politician stated that against the backdrop of a shortage of housing for the Turks themselves after the catastrophic earthquake, it is “insulting” to give the right to foreigners to buy it in bulk for the sake of a residence permit and tax benefits. But according to the results of the elections on May 14, Kılıçdaroglu, gaining 47.82%, lost to Erdogan, who received 52.18%.

The slowdown in demand from Russians, which was fixed until May, is explained by anxiety due to the uncertainty of the election results in Turkey, the instability of the Turkish lira, as well as problems with residence permits, for which there were mass refusals and threats to close the citizenship by investment program already in December, recalls an expert in foreign real estate and investment immigration Astons Alexander Kosovsky. In addition, in February-March, the earthquake also influenced the decline in demand, he says. “Buying real estate most often happens on an emotional level. The demand of Russians in Turkey is also influenced by the fact that citizenship by investment programs in the Caribbean were closed, Grenada and Vanuatu were available, but many wanted to buy real estate and followed the path of Turkey,” says Kosovsky.

The recovery of purchases of Turkish real estate by Russians demonstrates the beginning of satisfaction of pent-up demand after the May 14 elections, which formed in February-April, Arsen Ayupov, president of the Russian-Turkish Dialogue Association and partner at the NSP Law Office, believes. He notes that at that time a decrease in investment activity was recorded due to the fears of the Russians in connection with the statements of the Turkish opposition. In addition, because of the elections in March-April and the first half of May, not everyone was issued citizenship and a residence permit, the time for satisfying requests increased, says Ayupov. “Despite the fact that there are informal rumors that the investment limit may increase from $400,000 to $600,000 and even up to $1 million, residence permits, for which documents were submitted in March-May, are now being issued again,” he says.

At the same time, Turkey continues to have a 20% limit on the number of foreigners in certain urban areas; if this limit is exceeded, residence permits are not issued there (except for student and medical ones), recalls Ayupov. “In a number of cities, quotas were already filled by January against the backdrop of a massive excitement of Russians who moved to Turkey after the partial mobilization announced in September,” the expert says.

Among the factors that can stimulate the optimism of Russian investors, according to the expert, is the appointment of the renewed government of Erdogan in the economic bloc. So, the head of the Central Bank of Turkey became Hafize Gaye Erkan, the head of the Ministry of Finance – Mehmet Simsek, associated with Western financial institutions and adhering to traditional views on monetary policy. “This raises hopes for curbing, although slowing down, but still high inflation, a return to the policy of raising the rate,” says Ayupov. In May 2023, according to Turkstat, inflation was 39.59% year-on-year, in April – 43.68%, in March – 50.5%. The slowdown occurred after the suspension in January 2023 of the reduction of the key rate – it was left at the level of 14%. For comparison, in October 2022, inflation was at a record 83.45%, after the rate was cut several times a year.