ISTANBUL PROPERTY CENTER

A New Chapter for Turkey’s Real Estate Market

Turkey is gearing up for a pivotal transformation in its real estate sector by 2026, with new laws set to revolutionize the way property taxes are calculated. The shift from the current system to one based on true market value aims to ensure tax fairness, increase public revenues, and enhance market transparency. However, these changes also raise questions about their implications for real estate investment and market dynamics.

True Market Value: A Leap Toward Transparency

The decision to adopt true market value as the basis for property taxation marks a bold step forward for Turkey. This new approach addresses the longstanding disparity between declared property values and their actual market worth, which has historically hindered fair taxation.

Inspired by global best practices, this system positions Turkey to build a more reliable and investor-friendly real estate market. The reform seeks to eliminate the undervaluation of properties, ensuring more accurate tax collection and creating a level playing field for all stakeholders.

Building a Digital Infrastructure for Real Estate Transparency

Implementing the new tax system necessitates robust technological upgrades. The Turkish government is investing in advanced infrastructure to support this transition, including:

1. Property Value Maps: These maps will standardize property valuation and provide real-time updates on market fluctuations.

2. Integration with Land Registry Systems: Enhanced digital platforms will allow property owners and investors to access up-to-date information on property values and ownership details.

3. A National Real Estate Database: This centralized system will record accurate data on property values, transactions, and ownership, fostering transparency and streamlining decision-making for stakeholders.

These advancements aim to modernize Turkey’s real estate market, boosting investor confidence and aligning the sector with global standards.

Combating Tax Evasion: Enforcing True Value Declarations

The reform includes strict measures to curb tax evasion, a recurring issue in the real estate sector. Buyers and sellers will be required to declare the actual transaction value of properties, which must not fall below the tax-determined property value.

Key aspects of this policy include:

• Fines for False Declarations: Severe penalties will be imposed on parties reporting inaccurate transaction values.

• Periodic Audits: Authorities will conduct regular checks to ensure declared values align with actual market conditions.

• Enhanced Tax Collection: Accurate value reporting will close loopholes and increase tax revenue.

This shift is expected to significantly improve market transparency, benefiting both investors and the national economy.

Impact on Real Estate Transactions

The introduction of true value taxation is expected to influence property transactions in several ways:

1. Higher Declared Prices:
   Sellers will be obligated to disclose higher, more accurate property values, potentially increasing the costs associated with real estate transactions.

2. Increased Transaction Costs:
   With higher declared values, transaction fees—calculated as 2% of the property value for both buyer and seller—may rise. This could discourage speculative short-term investments but encourage more thoughtful, long-term purchases.

3. Shift in Investment Strategies:
   Investors may gravitate toward high-yield properties, such as commercial spaces or premium residential units, to offset higher taxes and fees.

The Future of Real Estate Investment in Turkey

While the new regulations may present initial challenges for investors, they also open opportunities for long-term growth and stability in the market.

1. Attracting Foreign Investment:
   The enhanced transparency brought by the reforms will make Turkey’s real estate market more appealing to international investors, who often prioritize clear regulations and reliable market data.

2. Focus on Sustainable Investments:
   Investors may increasingly seek properties with stable, long-term returns to justify higher acquisition costs under the new system.

3. Increased Property Value:
   Adopting true market values could elevate property values across the board, turning real estate into a more attractive and secure asset class.

Current Taxation System: Challenges and Opportunities

Under the current framework, property taxes are based on declared values, leading to significant discrepancies between actual market worth and tax obligations. This system has resulted in:

• Widespread Tax Evasion: Buyers and sellers often underreport transaction values to reduce fees and taxes.

• Revenue Losses for the Government: Inaccurate reporting hinders the state’s ability to collect fair revenues.

• Limited Market Transparency: Investors face difficulties assessing property worth, affecting market confidence.

The upcoming reforms aim to address these challenges while maintaining the sector's growth trajectory.

Broader Economic Implications: Strengthening the National Economy

The reforms are poised to boost the Turkish economy by:

• Increasing Tax Revenue: Accurate property valuation will lead to higher and more consistent tax collection.

• Stimulating Investment: Greater transparency and regulatory clarity will attract both domestic and foreign investors.

• Enhancing Urban Planning: Reliable real estate data will improve infrastructure planning and development across Turkey.

These changes will likely position Turkey as a more competitive player in the global real estate market.

Recommendations for Property Owners and Investors

To navigate these changes effectively, property owners and investors should:

1. Stay Informed: Keep abreast of legal developments and understand how the new tax system impacts their investments.

2. Seek Expert Advice: Work with legal and financial professionals to ensure compliance and optimize investment strategies.

3. Prioritize High-Yield Properties: Focus on assets with strong income potential to mitigate higher transaction costs.

A Promising Future for Turkish Real Estate

The upcoming reforms represent a significant milestone for Turkey’s real estate sector, aligning it with global standards and enhancing its appeal to investors. While the transition may pose short-term challenges, the long-term benefits—ranging from increased transparency to higher investment confidence—make this a pivotal moment for the industry.

By 2026, Turkey’s real estate market is expected to emerge stronger, more transparent, and better equipped to support the country’s economic ambitions.