1.000.000 TL FINES UP Impact of New Renting Out Regulation on Rental Income: Key Changes for Passive Income Seekers
Impact of New Renting Out Regulation on Short Term Rental Income: Key Changes for Passive Income Seekers
The Turkish real estate market is at a pivotal juncture, especially for investors and property owners aiming for rental income through short-term leases. A new regulation, published in the Official Gazette, is set to strictly oversee daily and short-term rentals. Effective from January 1, 2024, this regulation introduces stringent rules and hefty penalties for landlords and real estate investors. Here are the critical aspects of this new regulation and what it means for those seeking passive income from property rentals.
Key Highlights:
- Mandatory Permit Requirement: A significant shift for those renting out properties for less than 100 days is the compulsory acquisition of a permit from the Ministry of Culture and Tourism. This permit will be represented by a plaque to be displayed on the rented property’s door.
- Penalties for Non-Compliance: Landlords renting out without this permit face an initial fine of 100,000 Turkish Lira. Continuous non-compliance can escalate fines up to 500,000 Lira, and in some cases, even up to 1 million Lira.
- Application Process via E-Devlet: Applications for the permit must be made through the e-devlet system. The Ministry will conduct property inspections before granting permission.
- Restrictions on Tenant Numbers and Rental Duration: A property can be rented to a maximum of 12 individuals. Additionally, owners of buildings with at least 5 apartments will need to obtain a business license. Properties rented for more than 100 days are exempt from this regulation.
- Consent from All Property Owners: To obtain the permit, consent from all co-owners of the building is required.
We support this new implementation for the Turkish economy. Undoubtedly, this application, which restricts short-term rentals, will lead to an excess supply of rental housing stock in the market, and this will cause a decrease in house rents, which have been excessively increasing in recent years. We will see the positive effects of this in inflation.
Additionally, the security and moral threats posed by short-term rentals to society will be eliminated. This will increase the demand for hotels established for short-term rentals. In other words, everyone will be in their rightful place.
As Estates Istanbul, we have repeatedly warned, especially foreign investors who open their homes for short-term rentals. We were expressing that the stays conducted without full identity checks would have very negative effects on them. Due to the lack of proper checks, these homes, which became open to all kinds of malicious use, will now be used in a more stable and secure manner with this decision. We extend our special thanks to our government for this application.
On the other hand, in no economic model can both rental income and price increase be high. This is contrary to the nature of capitalism and even the physical laws of the world. Turkey, being a developing country, has an economy that is growing and creating added value. Therefore, rents reaching levels of 10% would hinder the growth of the Turkish economy and prevent the increase in real estate prices.
A customer who asks, “Why should I buy if it doesn’t create value?” leads to a contractor who says, “Why should we build if it doesn’t create value?” which in turn leads to a government that says, “Why should we provide services if no one is going to live there?” Then we can neither achieve the planned growth nor reach added value.
This new regulation marks a significant transformation in Turkey’s real estate market. It’s crucial for landlords and potential renters to be aware of these changes and comply accordingly. For real estate professionals and investors, these new rules also signal a time to reassess business models and strategies in the realm of passive income from property rentals.
At Estates Istanbul, we closely monitor such developments and continue to provide our clients with the latest information. For more insights and consultancy on these and other significant changes in the real estate market, feel free to contact us.
