The Turkish real estate market has increasingly attracted foreigners in the past 10 years. According to Nordic Monitor, the number of foreigners living in Turkey reached a peak in 2021 that represented a sevenfold expansion since 2010.

Turkey campaigns to lure foreign investment via property sales to foreigners. This strategy allows the government to meet some economic needs amid rampant inflation and a sluggish economy.

In 2017, Ankara brought in a policy allowing foreigners to obtain a one-year residence permit in return for the purchase of a property (at any price) in Turkey. Also, Turkish citizenship was made available to any foreigner buying real estate priced at one million dollars or more. In 2019, the property price qualification level for citizenship was cut to $250,000. Subsequently, looking to regulate growing demand from foreigners for Turkish real estate, in May this year, the level was fixed at a minimum of $400,000.

The conflict in Ukraine drastically stepped up the trend of foreign buyers snapping up Turkish properties. Last year’s bout of depreciation suffered by the Turkish lira—it lost 44% against the dollar—made the Turkish real estate market even more attractive for foreigners with hard currency to spare. Russian and Ukrainian foreign nationals feeing impacts of the conflict have looked to secure their assets in Turkey.

The Turkish citizenship available through property investments was a clear target for many of the foreign buyers, according to the Association for the Promotion of Turkish Real Estate Abroad (GIGDER).

Arab News reporting indicated that Russians became the third largest real estate buyers in Turkey after Iranians and Iraqis. Since the February invasion of Ukraine by Russia, Russians bought 509 homes in Turkey, with 111 sold to Ukrainians.

Different expectations

Tolga Idikat, CEO of Turkish property website Emlakjet.com, and Sergey Volchenkov, a Ukrainian expert on investments, reflected that Ukrainians and Russians do not have the same expectations regarding their investments in Turkey. The Russians, it seems, are ready to pay high real estate prices to acquire Turkish property, with the procurement of Turkish citizenship, their main motivation. Russian investors redirect assets the sanctioned Russia to Turkey where they can expand financial activities. The Ukrainians are more about looking for short-term deals in Turkey. They expect to return to Ukraine as soon as the conflict is over.

Turkish real estate website Turk.Estate said it had registered 51% more searches from Russia and 63% more from Ukrainians since February 2021. Hakan Sabbagh, sales manager for Akzirve, felt Russian demand for Turkish properties would probably increase throughout the coming months. Nihat Tufan, CEO of Rest Property, based in Antalya, Alanya, Bodrum and Istanbul, said:"We expect a 70 percent increase in demand from the Russian Federation."

The most in-demand locations from Russian and Ukrainian real estate customers in Turkey are Antalya, Istanbul, Izmir, Ankara and Bursa. Turk.Estate said that in February Russians and Ukrainians bought 25% of properties sold in Antalya, representing an increase of 96% for Russians and 85% for Ukrainians. The war in Ukraine has simply served drive up the popularity of Antalya with Russians. Some 30,000 are currently living there, along with 8,000 Ukrainians.

Website International Wealth indicates other interesting options for Russian property investors in Turkey. The province of Canakkale (formerly Dardanelles) has been presented as a promising alternative to Istanbul since the opening of the longest suspension bridge in the world between Lapseki and Gelibolu districts. Cannakale is said to be a good option for Russian investors looking for opportunities in logistics and industry. Russian analysts also predict the expansion of the cities of Lapseki, Gokceada and Bozcaada where Russian investors are already buying more properties. Naki Karaaslan, head of the Association of Russian and Turkish Entrepreneurs (RTIB), highlighted the potential of Izmir and Istanbul.

Turk.Estate suggested Ukrainians could be attracted by Edirne, a province located near Bulgaria. The region is presented as cheap in terms of short-term residencies in Turkey. Its proximity to Bulgaria, a country Ukrainians can enter without a visa, is convenient.

The foreign demand for Turkish properties has helped to send real estate prices in Turkey skywards. According to the Turkish central bank, property prices doubled in one year. Though Turkey, of course, has soaring inflation. It hit an official 79% in June. Some independent estimates put it at more than double that.

Paying over the odds

Investment analyst Volchenkov noted that the richest Russian investors in Turkish real estate market are willing to pay over the odds. They are ready and willing to pay over the required threshold of $400,000 to obtain Turkish citizenship. Sometimes these investors splash out on overpriced properties without even negotiating the price, said Volchenkov.

Russian investors, it seems, are less and less attracted by the European market given the benefits of non-European destinations such as Turkey and the United Arab Emirates. The Turkish government lays on many comfortable services, provided to the same standard found in Europe but at cheaper prices and with no negative attitudes towards Russians.

Zeynep Fıratoglu, a manager at Space, a real estate company based in Istanbul, emphasised that the geographical location of Turkey, on the doorstep of Europe, and its neutral stance towards Russian policy, along with the mature Turkish banking system, makes it an ideal destination for Russian investors.

The Turkish government has not imposed any sanctions on Russia since the start of the war in Ukraine, whereas the most permissive European countries, when it comes to foreign investors, are taking a harder stance against Russian billionaires. According to Forbes, Cyprus, which was an attractive destination as a tax haven for Russians, has revoked the passports of eight Russian billionaires.

Turkey has also not closed its airspace to Russian airlines amid the Ukraine crisis. It takes the approach of attempting to stay on good terms with both Moscow and Kyiv in order to remain available as a trusted intermediary that can work for peace. Turkish real estate sales to foreigners look set to grow for as long as Western countries impose sanctions against Russia and Ankara stays neutral.

Russian richest investors have bought a lot of luxury goods in Turkey, particularly in Istanbul. The Turkish government tried to create more incentives to attract them. Foreigners can obtain Turkish citizenship within 3 to 4 months if they invest 500,000 dollars for three consecutive years in the banking sector, Turkish governmental bonds, companies, investment funds or deposits. However, Şerif Nadi Varlı, an estate broker at Vartur Real Estate (Istanbul) indicates that Russian rich investors are not looking primarily for luxury properties but more for the Turkish citizenship allowing them to invest massively in the country. 

Growth in other Turkish sectors is likely to eventuate in tandem with the increasing presence of Russians in Turkey’s real estate sector. Construction could gain, while more and more Russians are coming to Turkey to relocate or open companies. According to Eray Sayin from Sayin Law & Consulting (Istanbul), Russians opened 64 new companies in Turkey in March 2022. According to her, the majority of these companies operate in the real estate and energy sectors.

According to the Turkish Union of Chambers and Commodity Exchanges, 136 Russian capital companies opened in Turkey in April, with 22 such Ukrainian openings in the same month.

Observers, meanwhile, point out a big difficulty for Russian investors coming to Turkey. Most have seen their banking accounts blocked outside Russia, while sanctions have also forced Russia out of the SWIFT international payments system. Most Russians arrive with cash or cryptocurrencies, hoping to make a quick property purchase.

Turkish banks remain reluctant to open formal bank accounts for Russian investors due to potential secondary sanctions that could be applied by the US. Turkish state lender Halkbank already faces a court case in the US for having allegedly taken part in a sanctions-busting scheme aimed at getting around American sanctions on Iran. If US sanctions enforcers once again target the Turkish banking sector, this could jeopardise foreign investors’ trust in this market.

As regards cryptocurrencies, Russian investors are more and more using them to transfer assets from Russia to Turkey and buy properties. Turkish real estate companies generally accept these transfers. Caldas and Alex Cihanoglu, a realtor from Istanbul, said that Russians were looking to convert cash into cryptocurrencies because financial transfers were viewed as increasingly complicated for Russians in Turkey. Thus, the cryptocurrency market is also likely to expand in Turkey on the back of Russian interest in Turkish real estate.