Istanbul Housing Market: Investment Climate, Best Areas and Prices

The Turkish housing market has demonstrated record growth ever since the re-opening of the country’s borders after the COVID-19 pandemic. The high demand for housing among locals and expats triggered an increase in property prices and rental prices. This applies first and foremost to Istanbul, the country’s largest and most developed city. Read on to learn about the Istanbul real estate market, its specifics, prices, and the advantages of buying housing here.

• State of the Real Estate Market in Istanbul
• Is the Istanbul Housing Market Overheated?
• Who Buys Real Estate in Istanbul
• Real Estate Options Available in Istanbul
• Housing Prices in Istanbul
• Real Estate Yield in Istanbul
• Property Taxes in Istanbul
• Benefits of Owning Real Estate in Istanbul
• Purchase of Real Estate in Istanbul with a Mortgage or in Instalment Payments
• Popular Areas for Real Estate Purchases in Istanbul

State of the Real Estate Market in Istanbul

Istanbul is the biggest city in Turkey with a population of 16 million people. The metropolis keeps expanding with new business and residential areas, consisting of high-rise buildings and gated villa communities. At the same time, demand for real estate in Istanbul exceeds supply.

At the same time, Turkey is struggling with hyperinflation. In October 2022 inflation soared to an all-time high of 85.51%, but had contracted to 64.71% by December 2022. The average annual inflation rate fluctuated at 10.9% between 2000 and 2021.

As the Turkish lira is decreasing in value, many local citizens buy foreign currency and invest in real estate. Owing to the significant number of foreigners coming to Turkey, this makes it possible not only to save funds, but also to multiply them, as rental prices are also rising rapidly.

According to a study conducted by Endeksa, a real estate data analytics platform, as of the end of Q1 2023 annual price growth reached 154% in Turkey and 144% in Istanbul, where the average price per square metre is TRY 27,000 (USD 1,300). Rental prices in Turkey rose 197% during the same period.

At the same time, in 2023 the total number of property deals is decreasing in Turkey as a whole and Istanbul in particular. Some analysts attribute the decrease to a fall in demand, while others believe that the slowdown is due to the earthquake in Turkey in February 2023 and to the presidential and parliamentary elections. If the second theory is true, Turkey may experience a new surge in prices owing to so-called pent-up demand. In other words, this would be due to potential buyers who held back from buying real estate until there was a clearer picture on political developments in the country.

Is the Istanbul Housing Market Overheated?

In March 2023 price growth slowed and inflation stood at 50.5% and was forecast to fall to 22% by the end of the year. However, it is highly unlikely that prices, including real estate prices, will decrease any time soon.

According to analysts, Istanbul’s housing market was overheated, in other words, there was a risk that it might exceed the limit of reasonable prices, but is returning to a “new normal”. This means that price growth will continue, but not at breakneck speed. Experts have come up with a number of arguments on why a real estate bubble in Istanbul is unlikely:

1. Taking inflation into account, real estate price growth does not look that vigorous. In Istanbul inflation-adjusted price growth equaled 59.4% in 2022.
2. The fall of the lira is one of the reasons for the price growth. Turkish developers import some of the materials, which means that they pay in foreign currency and accordingly this affects the final cost of the housing.
3. As inflation is slowing in Turkey, residential property prices will stop increasing.
4. The Turkish real estate market can survive even if there is an exodus of foreign investors. In 2022 foreigners accounted for only 4.5% of sales of real estate in Turkey.
5. Turkey is demonstrating economic growth, with GDP rising by 5.6% in 2022.
6. Turkish cities, including Istanbul, do not appear in the ratings of international banks on the risk of global real estate bubbles.

Who Buys Real Estate in Istanbul

Istanbul is the most popular Turkish city among foreign buyers. In 2022, in 40% of instances foreigners chose this city and bought properties here. Antalya came second. Foreigners are more and more interested in Turkey in general and Istanbul in particular. In 2022 foreigners concluded 20% more deals than in the previous year. It is highly likely that this trend will continue in 2023.

Most foreigners buying real estate in Istanbul come from Russia, Iran, Iraq and Ukraine. People buy properties to move to Turkey or to derive income from investments.

However, investors should remember here that Turkish citizens account for most of the real estate transactions in Turkey (95%). The same holds true for the letting of property. So when you choose a flat or house for resale or letting, consider the preferences of local residents. However, if you buy a flat closest to the historical centre of Istanbul, it is highly likely that you will be able to find tenants among foreign tourists or expats.

Real Estate Options Available in Istanbul

Istanbul boasts a wide variety of areas: historical and business districts, villa communities, gated townhouse complexes, islands and developing areas adjoining picturesque lakes and forests.

You can find practically any type of housing in Istanbul. The city has flats with views of the Sea of Marmara or the Golden Horn Bay or flats in bustling developing areas in the Asian part of the city. Istanbul property developers offer all manner of options: from studios and duplexes to penthouses with four or more bedrooms.

Areas which are more remote from the city centre, such as Beylikdüzü and Başakşehir, feature townhouses and villas. If you are into luxury, take a look at the district of Beşiktaş or the Princes' Islands which offer the most expensive mansions in the city.

Housing Prices in Istanbul

Real estate in Istanbul is more expensive than in other Turkish cities. Moreover, the prices grow more rapidly than anywhere else in the country. One square metre in Istanbul starts at about USD 700, while the average price is about USD 1,400. Prices for villas start at approximately USD 400,000.

Prices for flats in new builds depend on a number of factors, such as:

• size;
• the percentage of the building’s completion;
• distance to the city centre;
• distance to the coast;
• transport accessibility;
• the view from the windows.

Prices on the secondary real estate market are influenced by even more factors. For example, as Turkish people value their history, flats in historic buildings may cost more than flats in new builds.

Real Estate Yield in Istanbul

The yield from letting real estate in Istanbul has barely changed, notwithstanding inflation: about 3% to 5% per annum. Property owners may not increase the rent earlier than the expiry of the tenancy or lease period (usually this is a year) and by no more than 25%.

Please bear in mind that there is a tax on rental income in Turkey. It is calculated on a progressive scale and fluctuates from 15% to 40%. You have a tax-free part of up to TRY 9,600  (USD 460). At the same time, costs on the maintenance of the real estate are deductible for the calculation of the tax. So, if you let a property at USD 500 a month, the tax will equal 20% of your rental income.

If you want to resell your property in Istanbul, there are two ways to make a profit:

• Buy a flat at an early stage of the construction and sell it once the building has been commissioned. In this case, the yield may reach 30%.
• Sell a flat on the secondary market in a high-end or very promising area after five years. In the process you are likely to earn a significant amount due to the overall increase in residential property prices.

The key issue is that if you sell property within five years in Turkey, you must pay income tax. The tax is 30% of the amount by which the price of a house or flat increases.

Property Taxes in Istanbul

You will find a lot of luxury housing in Istanbul. So it is useful to know about the taxes that property owners have to pay.

1. Property transfer tax. It equals 4% of the value of the property. Frequently, it is shared: the buyer and the seller pay it together.
2. Value added tax (VAT) can range from 1% (in the case of properties over an area of less than 150 square metres) to 18% (in the case of properties of more than 150 square metres). The property price always includes VAT. If you spend more than 183 days a year outside Turkey, you can get a tax refund.
3. The annual property tax in Istanbul is higher than in smaller cities and ranges from 0.2% to 0.6% of the value of the property.
4. here is also a luxury property tax: if housing exceeds the cost of USD 280,000, a progressive tax of 0.3% to 1% is imposed on the share of the property price exceeding USD 280,000.

Benefits of Owning Real Estate in Istanbul

Istanbul is the business and commercial heart of Turkey. A number of the world’s leading companies have offices here. Istanbul is also one of the world’s main transport hubs, with connecting flights from Europe to Asia and vice-versa. As well as the opportunity to observe famous sights first hand and benefit from developed infrastructure, property owners in Istanbul are eligible for a residence permit (ikamet in Turkish) or Turkish citizenship.

Eligibility for a Residence Permit in Exchange for the Purchase of Real Estate in Istanbul

Until 2022, you could buy any type of property and become a resident. However, after the introduction of amendments to the requirements in May 2022, you must comply with the following criteria:

• the property must cost at least USD 75,000 (the value of the property must be determined by a licensed appraiser);
• the property must be located in an area which makes you eligible for a residence permit.

Since 1 July 2022 the Presidency of Migration Management has not registered applications for residency in 1,169 districts in big cities and 15 provinces of the country. Several more districts were added to this list in October 2022. These are neighbourhoods where foreigners account for 20% of the residents. 

You can get a temporary residence permit for six months to two years if you have a title deed (TAPU). Any application to extend the permit must be submitted 60 days before its expiry.

Important nuances.

• You cannot let the property that you bought if you want to get a residence permit.
• You may forfeit your right to extend your residence permit if you spend more than 120 days a year outside Turkey.

A residence permit grants the holder most civil rights, except the right to vote. In other words, the holder of a residence permit in Istanbul can send their children to a local school, open a bank account, and relocate the family. On the other hand, after getting an ikamet you may only live in the area which issued a residence permit for you. You must have registration in Turkey - furthermore, the police monitor this issue stringently.

Turkish Citizenship through the Purchase of Real Estate in Istanbul

Turkey might be the only country in the world where you can get “instant” citizenship for buying property. The minimal investment must be USD 400,000. You can buy as many properties as you want to apply for a Turkish passport. To do so, you must comply with several criteria:

• You must buy the property from a Turkish citizen or a Turkish company.
• You must be the first person to buy this particular property to be eligible  for citizenship.

In such circumstances, the safest option would be to buy a flat or a villa directly from the property developer.

You are allowed to let a property that you bought to apply for citizenship. After owning it for three years, you can sell the property and keep your passport. As well as the actual investor,  their family members can apply for citizenship. Investors must be 18 or older, have a confirmed legal source of income, must not have a criminal record and socially hazardous diseases.

Purchase of Real Estate in Istanbul with a Mortgage or in Instalment Payments

Foreigners can buy real estate in Istanbul both with a mortgage or in installments. However, there is one material disadvantage: you cannot obtain a residence permit or become a Turkish citizen until you have paid for the property or mortgage in full. Turkish banks offer a mortgage on the following terms and conditions:

• the term of the mortgage is up to 20 years;
• the amount of the mortgage can reach up to 75% of the value of the property;;
• the interest rate ranges from 11% to 15% in Turkish lira and from 6% to 8% in US dollars;
• the bank’s commission may equal up to 0.5% of the loan amount.

You can apply for a payment in instalments before the building has been commissioned and at zero interest rate. However, monthly payments should not exceed 30% of the family income.

Popular Areas for Real Estate Purchases in Istanbul

Istanbul is a very diverse city, with bustling business areas, tranquil historic districts with a languid luxury life, new areas with skyscrapers, and gated communities with mansions and villas. The most expensive properties can be found in Beşiktaş and on the Princes’ Islands. Whereas Beşiktaş is still developing and you sometimes find new builds here, you will not find any new properties on the islands. This is a protected area and construction is prohibited at present. You can only buy a villa on the Princes’ islands when someone decides to sell. Stringent rules are in force on the islands: you may not drive here and there are no petrol stations.

Admittedly, investors tend to buy real estate in other districts. We will tell you about some of them.

Kadıköy

A big residential area in the Asian part of Istanbul. Although it does not boast as many attractions as the European part of the city, Kadıköy has everything you need for life: shops, markets, cafes and restaurants, a promenade and some parks. Bağdat Avenue features several boutiques of world-famous brands.

In Kadıköy you can find public and private schools, hospitals and healthcare centres. It is also home to the stadium of Fenerbahçe football club. Kadıköy is connected to the European part of Istanbul by ferry, the metro, water taxi and road.

Here you can buy flats in modern buildings and new builds. Property prices in Kadıköy are slightly higher than in newly developed areas and start at about USD 2,000 per square metre.

Üsküdar

Üsküdar is one of the oldest districts in Istanbul. It boasts spectacular mosques and the Maiden's Tower, one of the city’s most iconic sights associated with romantic legends.

Üsküdar is Istanbul’s biggest educational and medical district. It has a lot of schools, universities and medical clinics. The district is also famous for its numerous green parks.

You can get to European Istanbul from Üsküdar in the same way as from Kadıköy: by water transport, metro, bus and taxi. Car owners in Üsküdar can cross the Bosporus Strait in no time by the 15 July Martyrs Bridge, otherwise known as the Bosphorus Bridge.

Üsküdar is considered to be a high-end area. You can buy a luxury flat or villa here.

Esenyurt

Esenyurt is a dynamic area in the European part of Istanbul. It is mostly popular with young people as all the residential complexes here have a modern design.

While Esenyurt is a fair distance from the tourist part of Istanbul, two major highways run through this district, E5 and E80, enabling you to get to Taksim Square in just 30 minutes. Esenyurt is 45 km away from Istanbul International Airport and 6 km away from the Sea of Marmara.

You will find here a number of markets, parks and water bodies. It has all the necessary amenities, including schools and hospitals. The prices for flats in new builds in Esenyurt start at USD 150,000.

Beyoğlu

Beyoğlu is one of the most famous areas of the city and will appeal to history buffs and aesthetics lovers. Here you will find Taksim Square and İstiklal Avenue which are popular with tourists. A number of foreign embassies are located here. The historic Istanbul tram also runs through Beyoğlu, passing by 13th-century buildings that sit side by side with modern mansions. The Galata Bridge connects Beyoğlu with the historical area of Fatih. The area has a lot of terraced cafes and restaurants with fantastic views of the Golden Horn Bay. 

Unfortunately, Beyoğlu is one of the most expensive areas in Istanbul. Residential property prices are influenced not only by the proximity of historic sights and old architecture, but also by the rarity of new residential complexes here. For example, the cheapest flat in the new Tersane Istanbul complex with private piers, an embankment and a shopping centre costs USD 734,000.

Şişli

Şişli is one of the central areas of Istanbul which has been transformed into a business and commercial district. Şişli is adjacent to the city’s most prestigious areas such as Beyoğlu and Beşiktaş. The offices of famous companies and banks operate out of modern skyscrapers here.

Şişli is also the cultural heart of the city, home to a number of theatres and museums. You will find universities and other prestigious educational facilities in Şişli. Interestingly, the area is connected to Taksim Square by the aerial cable car Maçka Gondola.

Şişli is a noisy and densely built-up area that will appeal to highly-skilled workers and their families who lead an active life. Prices for flats in new builds are rather high and start at about USD 300,000.

Küçükçekmece

Küçükçekmece is a rapidly developing area with many shopping centres, university campuses, Istanbul’s leading schools and parks. The area offers flats and townhouses at reasonable prices, as well as expensive villas.

Küçükçekmece overlooks a large and picturesque lake that flows into the Sea of Marmara. There are several museums in the area and a huge water park called Grand Aqua Marine. Küçükçekmece is not close to the city centre. It will take about an hour to reach Taksim Square by car.

Prices for flats in Küçükçekmece start at USD 200,000, while the cheapest villas cost USD 1,500,000.

In a Nutshell

Istanbul’s housing market has been booming ever since all COVID-19 restrictions were lifted in Turkey. Owing to inflation,  real estate prices increased 144% in 2022. Experts expect a slowdown in 2023, but at the same time do not forecast a fall in housing prices. That is why Istanbul is so attractive to foreign investors. However, people don’t only buy properties here to invest and make a profit. Owing to global geopolitical developments, Istanbul has become a vital business and transport hub. As a result, expats come here from all over the world. Foreigners can get a Turkish residence permit or even citizenship by buying real estate in this metropolis.

Cover photo: frimufilms (Freepik)