By Ceyda Caglayan

ISTANBUL, (Reuters) – Record home sales to foreigners in Turkey are being driven by a falling currency and the promise to citizenship. However, this trend is starting to slow down after a new rule was implemented by government to reduce inflated prices. Property experts agree.

Reuters spoke to real estate experts and sellers of property that cheaper properties had been sold for $250,000 to foreign buyers before the rule was changed. This is the lowest price Turkey can grant passports to foreigners.

They claimed that some sellers worked with select appraisal firms to raise prices to secure buyers’ citizenship. The difference in market value and price paid was later returned to buyers.

Last month’s regulation, however, made it so that appraisers are automatically assigned to property by the land registry authority. This prevents potential abuse.

GIGDER is an industry group that supports Turkish home-makers abroad. It stated that prices for some properties sold to foreigners since September 20th, when the regulation was passed, have fallen by between 30-45% and some potential buyers are now leaving.

Omer Faruk Akbal, head of GIGDER said that the difference in sales prices for construction companies and their new valuations had led to suspicion among foreigners.

He said, “We’ve seen presale agreements being cancelled and sales offices disappearing since then.”

BUILDERS FROM AROUND

Construction booms have helped fuel economic growth throughout President Tayyip Erdoan’s more than two decades at power. Under the citizenship scheme cash from overseas helped compensate for Turkey’s heavy trade imbalance.

According to the government, some 7,000 people received Turkish citizenships through home purchase between 2017-2020.

General Directorate over land registries stated that it approved the regulation in September because of “certain observed irregularities” in appraisal reports.

Official data indicates that foreign home sales reached an all-time high at 6,630, mostly to Iranians.

According to central bank data, net foreign investments in real property totaled $5.7 billion last year.

GIGDER’s Akbal anticipates foreign construction companies selling a record number of homes by year end, but the new regulation may reduce this.

Turkey’s sales contributed to an even greater rise in living expenses that has affected Erdogan’s opinion polls. Last month, housing-related inflation exceeded 20% due to rising rents, mortgage rates, and valuations.

INFLATING PRICES

Ankara adopted the citizenship-for-homes scheme in 2017. A year later it cut the minimum price https://www.reuters.com/article/us-turkey-currency-citizenship-idUSKCN1LZ1SR to $250,000, from $1 million, to attract foreign buyers and help alleviate the currency the crisis.

A representative from the property industry requested anonymity to say that properties of less than $150,000 were not allowed to be filed to the Land Registry Authority with $250,000 prices tags in order to obtain citizenship.

The person stated that $100,000 would be returned to the buyer by the construction company after it was sold.

Babacan Holding’s chairman, Ibrahim Babacan said that six of the 10 sales he made to foreign buyers in the past were likely to be cancelled by the new regulations.

He said that the customer bought the property to become a citizen, but the appraisal reports lower values and he cancelled the contract. Additionally, appraisers often report different valuations than builders.

Babacan claims that October sales will be slowed by the new rules, but foreigners will still be interested in the depreciation of the lire. He said that Turkey can be bought for half the cost of Dubai.