At first glance it might seem that Turkey and the Republic of Cyprus in the south of the island have a lot in common with rich and ancient cultures, historic buildings, stunning beaches and a warm eastern Mediterranean climate but it is here that the similarities end. If you are in the process of trying to decide which nation to invest in, there are a number of factors to consider.
Cyprus has a British heritage, which influences many aspects of daily life, yet at present a Communist Party is in Government. As with many Southern European nations, it has been badly affected by the economic downturn of recent years, leading to recession and depressed house prices. At this moment, the Government is in the throes of negotiating a bailout from the EU, of which it is a member nation. Cyprus is also part of the Eurozone block.
Strong economic growth
Turkey, in many ways, is the polar opposite and is currently enjoying strong economic growth on the back of rapidly rising business investment and tourism. This growth is driving major new infrastructure investment, including a third airport in Istanbul at a cost of €7 billion – projected to be the world’s largest – and a new high-speed train which will link Turkey’s South East with the popular Black Sea region. Unlike Cyprus, Turkey has rising house prices and its own currency, the Turkish Lira, although prices for many items, particularly property and infrastructure, may be quoted in pounds or US dollars.
This is the most obvious cost, meaning your attention will correctly be drawn to comparing property costs and value for money. It might seem more attractive to exclude countries with poor performing economies in favour of steadily growing ones. However, it is much easier to bag a bargain and get a lot more property for your money in countries like Cyprus, which have seen prices tumble.
In 2012, Cyprus was one of the most popular of all destinations with property purchasing British expats, largely because of the subdued property prices and willingness of sellers to drop prices. In addition, there was a weaker Euro in the second half of the year.
The booming Turkish economy is seeing healthy price growth, which is great news if you are looking to sell but not so desirable for those entering the market.
Cost of living
The actual cost of living in a country often gets overlooked in the excitement of buying a dream property. Yet everyday living costs play a leading role in your ability to finance a property as well as in enjoying your new home country to the fullest.
As a general guide, living expenses are considerably cheaper in Turkey than the UK. Food can be a fraction of the cost but in contrast petrol is somewhat more expensive. Another attractive factor is the high interest rates offered by Turkish banks on savings accounts, typically around 10 per cent or more. However Turkey has a high rate of inflation, which averaged close to nine per cent in 2012.
Partly because of its status as a small island nation, Cyprus is generally subject to higher prices than the UK. Food is more expensive, and electricity is charged at one of the highest rates in Europe. Other utilities however, particularly water, are cheaper. As in the UK, the interest rates on savings accounts with Cypriot banks are nothing to get excited about.
Taxes can play a huge role in determining the affordability of a country, and when you consider property taxes, income taxes, business taxes (if you plan to import or establish a business), healthcare contributions, council charges, vehicular taxes and compulsory airport/customs contributions, things quickly add up.
As it negotiates a bailout for its beleaguered public finances, Cyprus is looking at a raft of tax increases, which will affect locals and expats alike. Turkey on the other hand has cut certain taxes in recent years as a means of attracting further international investment.
Turkish and Cypriot immigration
Another factor that can help you to determine which of the two countries to invest in is immigration. As a member of the EU, Cyprus does not place restrictions on Britons entering the country, buying property or working there.
Turkey is not currently an EU member and, as such, there is the added layer of immigration to consider, which can make the entire process of buying or moving there more complex. Issues (and costs) to consider include visa or migrant applications for your family and your pets.
So close but so far apart
The divergent cultures and economic situations of both countries mean that opportunities in each differ greatly. Hopefully you can now see that choosing whether Cyprus or Turkey is the right place for you to purchase a property will involve not just your personal tastes, but also a detailed examination of your current and future financial situation.
Richard Way, Editor, Overseas Guides Company (OGC)
Tel: +44 207 898 0549