Turkey’s real estate market has long been perceived as an affordable and promising option for international buyers. Low entry thresholds, citizenship-by-investment programs, and popular tourist hotspots have drawn in hundreds of thousands of foreign purchasers. Yet recent economic instability, the depreciation of the Turkish lira, and a construction sector crisis are causing many to question the profitability of investing here. Is this a temporary downturn or the beginning of the market’s decline?

What led Turkey’s real estate market to its current state?

1. High inflation and lira devaluation

Over the past five years, Turkey has been grappling with some of its highest inflation rates. The rapid depreciation of the lira has led to soaring prices on almost every product and service, making both living and vacationing in Turkey far less cost-effective. Although local property prices are often quoted in euros, the combination of a weak lira and rising costs means that real estate is no longer “cheap” for foreign investors, and it’s virtually unaffordable for many Turkish citizens. Unsurprisingly, demand has dropped significantly, and the overall market is experiencing its worst slump in decades.

Outlook:

Despite Turkey still attracting foreign buyers, the net rental yield and investment potential are currently quite low, especially after taxes. Anticipating any significant price appreciation in the coming years may also be overly optimistic. A positive market trend could emerge if Turkey stabilizes its economic policies, but this prospect appears unlikely in the near or even medium term.

2. Construction Sector Crisis

Turkish developers are facing serious hurdles. Escalating construction material costs, declining demand, and limited liquidity have forced many projects to shut down. Developers often sell completed units at deep discounts in an effort to recoup expenses and reduce losses.

Outlook:

For investors, these discounts might present opportunities to purchase properties at lower prices. However, there are inherent risks, including potential issues with construction quality and the possibility of halted or unfinished projects.

3. Geopolitical Instability

Political tensions in the region remain high. Conflicts with neighboring countries, international sanctions, and strained relations with the EU and the United States deter many foreign investors—particularly those seeking a stable, long-term residence in Turkey.

Outlook:

Should the geopolitical landscape improve, foreign interest in Turkish real estate could rebound. Nevertheless, this factor hinges on the country’s foreign policy direction, and under the current leadership, the likelihood of a major positive shift is slim.

Taxation: What Awaits Property Investors in Turkey?

Taxes represent one of the most underestimated costs for real estate investors. In Turkey, taxes on rental income, capital gains, and annual property ownership are notably higher than in several other popular investment destinations. This disparity becomes even clearer when compared to countries like Thailand.

Below are the key taxes foreign investors should be aware of:

1. Rental Income Tax

• Non-residents: A flat 20% tax rate on rental income.

• Residents: A progressive tax rate ranging from 15% to 35%, depending on total income.

2. Capital Gains Tax

• Selling property within the first five years incurs capital gains tax, which can reach up to 35% on the profit margin (the difference between the original purchase and final selling price).

3. Annual Property Tax

• Owners pay an annual tax of 0.1% to 0.6% of the property’s assessed value.

By comparison, Thailand offers considerably lower taxation:

• Rental Income Tax: A flat 15% rate.

• Capital Gains Tax: None.

• Annual Property Tax: None.

Why It Matters:

Turkey’s tax regime places a heavy burden on long-term real estate investments, especially if your strategy relies on rental income or selling the property within a few years. While Turkey’s citizenship-by-investment program once offset these costs for some, recent changes to the program have reduced its simplicity and allure. In contrast, Thailand’s softer tax environment remains more appealing for many investors.

Conclusion: Is Turkey Really Worth It?

At first glance, Turkey appears attractive for real estate investment, but a closer look reveals substantial limitations. Property prices have risen to levels comparable with other major tourist destinations, yet rental demand is largely seasonal—starkly contrasting with markets like Thailand or Indonesia, where short-term rentals remain robust all year round.

Moreover, economic and geopolitical challenges have depressed Turkey’s market, limiting capital appreciation, even in premium segments. The high tax burden further erodes profitability, affecting both rental yields and potential resale gains.

Why Turkey May Fall Short

• Lower Rental Yields due to seasonal demand.

• Limited Capital Growth in a stagnating market.

• Heavier Tax Obligations on rental income and capital gains compared to competing markets.

For investors looking for long-term, stable returns, Turkey currently lags behind other destinations like Thailand or Indonesia when considering rental profits, property value growth, and tax policies. If maximizing ROI is your primary goal, more investor-friendly markets may offer better conditions and fewer risks.