For the past five years, Turkey’s Citizenship By Investment (CBI) program has enjoyed massive popularity, despite a 2022 price increase to $400K on the RE option. Yet in 2023, there are a number of important new program changes to be aware of.
Let’s get into the details below…
Turkey is a phenomenal country in many respects. Boasting a rich cultural history, food security, spectacular scenery and an increasingly significant role in regional geopolitics, it is a compelling “hedge” destination.
Whether you’re hailing from the Middle East, Russia, Canada or the US, Turkey could be a great “non-aligned” Plan B destination.
And while the Turkish passport doesn’t offer visa-free access to places like the UK, EU, US and Canada, the appeal of the country, combined with a low investment price tag, made it the top-performing CBI program for several years running.
(The minimum investment amount was increased from $250,000 to $400,000 during June of 2022 to curb the massive demand for the program.)
By as early as June 2020, over 9,000 primary applicants and more than 25,000 dependents had obtained Turkish citizenship via the program.
During the period March to May 2020, at the height of the pandemic, Turkey’s Interior Ministry approved an average of more than 1,300 main applicants per month, raising an estimated $17 million per day in the process.
THE value-for-money CBI program
Additionally, an over-supply of real estate, combined with the rapid devaluation of the Turkish lira, made property in Turkey super cheap at the time. Consequently, foreign investors flocked to popular vacation spots such as Bodrum, Istanbul and Antalya – and started driving up real estate prices in the process.
But with this massive CBI demand also came some sharp industry practices – including property valuations fraud, and the abuse of promissory sales contracts.
With a view to address these issues and prevent local Turkish buyers from getting squeezed out of the market – without jeopardizing this lucrative revenue stream – the Turkish authorities have taken a number of remedial steps.
The 2022 price increase was one such step – although according to industry insiders, this didn’t do much to curb demand. Another was the introduction of a rule that prevents a single CBI-eligible property from being used for more than one CBI transaction.
I.e., you cannot sell your CBI property to another CBI applicant in future.
In order to be able to use the property for another CBI application, it would first need to be sold to a native Turkish citizen or company, who in turn would need to hold it for a period of three years.
While this may strike prospective applicants as a major negative – as it removes an obvious category of future buyers from the equation – our partners in Istanbul and Bodrum see things differently:
According to them, it is estimated that an additional 500,000 homes per year will be required, for the next 10 years, to meet Turkey’s burgeoning domestic demand (a function of its favorable demographics).
And of the ~250,000 property sales presently being registered in Turkey per year, only 60,000 were sold to foreigners, with only around 5,000 of those transactions being CBI related.
This means that only 2%-4% of all potential property buyers in Turkey will be interested in acquiring Citizenship By Investment – the rest will all be locals, so this restriction shouldn’t be a major factor.
A number of the new regulations enacted by the General Directorate of Land Registry and Cadaster, effective 1 February 2023, are fairly “administrative” in nature. Others, however, can be far more significant, both for prospective applicants and RE developers alike.
In fact, industry insiders predict that some of the more substantial changes will mostly affect foreign-owned companies. They will no longer be able to build or renovate Turkish properties with a view to sell them to CBI investors.
So to make sense of the amended regulations, we spoke with our trusted RE partners on the ground.
Here’s a summary of the key changes to be aware of…
Turkey’s CBI: The latest round of program changes at a glance
- REGARDING FOREIGN RE DEVELOPERS IN TURKEY: For starters, as of January 1st, properties built or sold by foreign RE companies are no longer eligible for use in CBI transactions. And even if a foreign shareholder in such a business became a Turkish citizen via the CBI program themselves, these new restrictions would still apply to them and their companies.In order for a property sold or built by a foreign company to be eligible under the CBI program, the foreign entity would first need to sell it to a Turkish company or citizen, who in turn would need to hold it for a minimum period of three years.
This is bad news for foreign players, but great news for domestic ones – who really have been the intended beneficiaries of the program since day one…
- REGARDING THE NUMBER OF PROPERTIES AND USE OF SINGLE SALES CONTRACTS: CBI investors have the option of purchasing multiple properties to the value of $400,000 or more. Just keep in mind that buying in multiple projects can lead to potential cost escalations, complications and delays.Moreover, if you were to buy multiple units using a preliminary sale agreement (usually during the construction phase), it needs to be from a single seller. For title deeded properties, you can buy from multiple sellers.
- REGARDING JOINTLY OWNED PROPERTIES: Multiple people cannot apply on the basis of joint ownership of a single property. I.e., only one person can apply per property, even if its value exceeds $800,000 (i.e. $400,000 x 2).This requirement seeks to prevent foreigners from entering the industry as market players and benefiting through renovating and flipping their own CBI properties, whilst local companies lose out.
It also seeks to stop the luxury property market from overheating, by preventing CBI investors from pooling their funds to buy top-end properties.
Instead, the Turkish authorities’ intention is to stimulate the middle-market segment, which is where the bulk of the domestic demand and current stock shortages exist…
- REGARDING LIMITATIONS ON WHERE YOU CAN BUY: While there are no limitations on where you can buy your CBI property, no district or suburb can have a “domiciled” foreign population of more than 25%. (This applies to both CBI citizens and residents, and a government entity called NUFUS monitors and controls this automatically.)There are, however, also a number of “military restricted zones”, including some areas of the Bodrum Peninsula, in close proximity to Kos Island, where foreigners are not eligible to buy property.
A knowledgeable service provider can advise you on these limitations.
(Sovereign Confidential members, reach out to us if you’d like to obtain our trusted providers’ contact details.)
As the world becomes a more uncertain place, and against the backdrop of civilizational decline in Western countries, having a second citizenship in a “non-aligned” country can be more valuable than ever.
So if you’re looking for a highly livable “geopolitical hedge” destination as part of your own Plan B, then Turkey could be well worth considering.