Turkey property– new build or resale? How does new VAT change affect things?

February 26, 2013

Off-plan property has fallen out of favour in many countries across the globe, following on from the property crash in 2007. Many would-be, “off-plan flippers” came unstuck. They had originally planned to buy off-plan property in a rising market and because the property prices were going up, they could then sell-on and offload properties at a profit. Selling before completion was important, so that the completion costs and taxes could be avoided. The property market downturn caught out a lot of off-plan buyers of property in countries like Spain and many are still wooing the day.

Off-plan property and Holiday Homes – its purpose?

Off-plan Turkey, new BuildHowever in some markets, off-plan property serves a purpose. For example buying in a developing market where there is a shortage of quality housing, or a new city-centre location where a new site is being renovated. Turkey has had its fair share of off-plan developments and these have been good news, not only have the new builds been good in investment spots like Istanbul (because newer buildings have had to be built to withstand earthquakes post the 1999 earthquake), but also as holiday resorts have sprung up in beautiful coastal areas. New homes have been built along the Aegean coast like holiday homes in Kusadasi, or along the Mediterranean coast like holiday homes in Fethiye, to meet demand as more and more tourists want to buy their own coastal holiday home in Turkey.

A recent change in VAT might alter the make-up of the Turkey property market. Whilst buying a holiday home in Turkey or an investment property remains very competitively priced, compared with other holiday destinations in and outside of Europe, the price of off-plan or new build could edge up. So buyers might want to check before buying off-plan property in Turkey that the costs remain competitive.

Turkey Property –New Build VAT changes- what are they?

From 1 January 2013 the KDV (Katma Deger Vergisi-VAT in Turkey) on larger, newly built, homes is set at the standard rate of 18%. This means that more property will fall within the standard 18% tax band. For new build properties of less than 150 square metres, the rate is 8%.

Sales or purchases of properties which received their Building Licences before 1st January are exempt from the new rule and the old KDV system should apply.

So in the short term not much will change, but as developers apply to build more homes they will be faced with a higher VAT burden and some smaller developers could choose to pass some of this onto buyers of Turkey property. Buyers of property in Turkey can request information on which KDV rate has been applied to the property price.

The new VAT changes don’t currently affect older properties, so resale property in Turkey could look more attractive in comparison with smaller apartments, which will be affected by the change.

It is also worth putting this in context. There was a bigger increase in buyers of property in Turkey in the 76-100 sqm home size bracket than any other in 2012. So most buyers of a Turkey holiday home or investment property, should not be affected.

It is always advisable to work with a good, professional agent who can help and advise on these matters and who has useful local, in-market contacts who can give the latest, up-to-date picture.

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Property Venture® is an award-winning, UK-based agency for overseas property who helps people buy investment property and holiday homes in Europe, more easily and safely than they can on their own, because we offer grounded common-sense advice.

The focus is mainly greater Europe: Poland property, UK investments, Spain property, Turkey property, Cyprus property

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