Turkey has issued almost 3,000 citizenships to primary foreign investors (excluding dependents) and has swiftly positioned itself as one of the fastest-growing citizenship programmes in the world. A success story – but is it?
We delve deeper to examine concerning local reports and highlight the risks that need to be mitigated to ensure that this success perdures.
The Turkish Citizenship by Investment programme has drawn a much-needed influx of foreign investment into Turkey as it currently navigates through turbulent economic waters. In order for this Citizenship programme to continue to deliver wins for the host nation and foreign investors, it is imperative that all players in the industry (real estate professionals, foreign agents, Turkish investment migration firms etc..) continue putting their clients’ interests first and foremost.
Benefits of Turkish Citizenship
Launched in 2016, Turkey’s Citizenship investment programme only drew the attention of foreign investors after its price drop from US$ 1 Million to US$ 250,000 in 2018. The Government of Turkey reported that in 2018 there was an annual increase of 78% in the total property sales made to foreign investors. The most successful real estate locations were Istanbul, Antalya, Bursa and Ankara.
According to Arton Capital’s Passport Index, the Turkish Passport is ranked 36th and enables access to 121 jurisdictions (visa free/visa-on arrival).
For foreign investors seeking long-term gains, obtaining a Turkish passport has proven to be a very beneficial option and a stepping stone to American residency.
Turkish citizens are U.S. E2 treaty members. Turkish entrepreneurs and businesspeople can therefore set up their company in the U.S./invest in an existing, and one reside there (subject to their investment in the U.S. meeting certain criteria).
Factors Impacting the Surge in Demand
But what has generated this surge in demand for Turkish real estate? A myriad of reasons has drawn investors to Turkey, amongst them are:
- The fall in value of the Turkish Lira vis-à-vis the US$ due to a struggling Turkish economy, has drawn in foreign investors from both the Middle East and Far East seeking ‘great value for money’ investments.
- Real Estate prices have also fallen, making Turkey an attractive proposition for foreign investors who can invest now and acquire comparatively more for their money.
- Continuing political turmoil in the Middle East has created a ripple effect of instability that has motivated Iraqis, Iranians and Saudis to seek a second citizenship as their safeguard.
- Palestinians in particular have found the Turkish citizenship programme, with its accessible investment requirement of US$ 250,000, a favourable route to obtain a passport, facilitating their travel and emigration.
Needless to add, Gulf investors in particular have also been drawn to Turkey’s Citizenship programme due to the familiarity they can identify with Turkey in terms of cultural affinity and geographic proximity.
Read more: Bodrum attracting Foreign Investors – The St Tropez of the Aegean
Clients First Approach
Clients should always come first, in terms of investment migration professionals’ business ethos and ethics.
Yet, we have received reports from local Turkish Citizenship by Investment firms that several Asian migration agents, predominantly from China, have been liaising directly with Turkish real estate developers.
What is of concern is that they are purportedly seeking high sales commissions of 20 -25% as a pre-condition of their collaboration. In a bid to avoid bankruptcy, at a time when Turkey is undergoing economic hardship, a handful of Turkish developers have conceded to these terms.
As a result, developers are selling units and houses in Turkey at inflated prices to be able to pay these foreign agents their required commissions. What is even more worrying is that some of these units/houses are bank-owned properties as the developers have been unable to repay their loans.
The Turkish Citizenship programme regulations require an independent Evaluation Survey Report to confirm the property is in fact worth US$ 250,000+.
What is most alarming are reports from local Turkish CBI agents that a handful of developers who have added high commissions to properties (valued at less than the minimum threshold) have also resorted to soliciting that licensed evaluation experts present inaccurate amounts in their official reports.
Mitigating Risks
These claims raise a myriad of risks to the integrity of the Turkish Citizenship Programme, namely:
- Risks to investors’ confidence once they try to re-sell their investment properties in three years and can’t make any gains on their assets or worse, can’t recoup the amount invested.
- Risks to the integrity of the Turkish citizenship programme in the eyes of the public. As well as raised eyebrows from the European Union, amongst others.
It also works against the gargantuan efforts that investment migration ‘ambassadors’ such as the Investment Migration Council are working on to enforce ethics and due diligence standards across the industry.
At times unaware of these risks, foreign agents are promoting these risk-ridden investment properties to their clients as they lack in-depth knowledge of the Turkish real estate market. By not knowing ‘who is who’ in the Turkish real estate markets, they may be exposing their client to risks down the line.
As with all things – knowledge is power.
Foreign migration agents have a responsibility to seek the expertise of reputable investment migration professionals in Turkey who have ‘local eyes and ears’ to safeguard their clients’ investment and interests. Similarly, foreign investors must safeguard their investments by undertaking their own due diligence. Ideally working with agents that only collaborate with professional Turkish Citizenship by Investment firms and reputable Turkish developers.
