From January to December 2021, the lira has almost halved against the US dollar. While in January 1 dollar was equal to 7.4 lira, in December the dollar is worth 13.83 lira.
The main fall in the lira took place in November 2021: the Turkish currency depreciated by 30% in one month. On 23 November it set an anti-record, losing 18% in value in one day.
The lira is falling in value as a result of economic policy of the Turkish government and central bank.
Inflation in Turkey has accelerated because of the pandemic and economic crisis. One way to fight inflation is to increase the central bank's interest rate. When they do this, people borrow less, the amount of money in circulation falls, and the value of the currency goes up.
Turkish President Tayyip Erdoğan has forbidden the central bank to raise the interest rate. On the contrary, it has been lowered three times during autumn 2021, most recently on 18th November.
Inflation in Turkey reached 20% in November 2021 as a result of the lowering of the central bank interest rate. Inflation is only higher in Argentina with 25% and Venezuela with 2720%.
On 3 December 2021, agency Moody's affirmed Turkey's credit rating at B2, which means a high risk of economic default. Moody's experts predict a further rise in inflation and depreciation of the lira against other currencies.
How the lira exchange rate affects the value of investment property
To participate in the Turkish citizenship programme, an investor buys a property worth at least $250,000.
The value of real estate for the citizenship programme is not based on the market price, but on the cadastral value of the property. However, the market value and the cadastral value may not be the same.
The cadastral value is calculated according to the lira-dollar exchange rate on the day the property is valued. If the cadastral value of the property was $250,000 in January 2021, it will be around $118,000 in December due to the depreciation of the lira.
Market prices for buying objects do not change immediately according to the exchange rate. Therefore, in December 2021, an investor will actually have to buy a Turkish property for more than $500,000 in order for the cadastral value of the property to comply with the established minimum of the citizenship programme.
Why investors would benefit from a second passport by investing in Caribbean real estate
The Caribbean countries of St Kitts and Nevis, Antigua and Barbuda, Dominica, Grenada and St Lucia also offer investors the possibility of obtaining citizenship by investing in real estate. But the conditions for buying property in the Caribbean are more favourable for investors.
All real estate projects are controlled by the national government. Participants in Caribbean citizenship programmes buy shares, apartments and villas only in properties that are approved by the national government.
Investors' money to purchase real estate is deposited into a special escrow account by the Citizenship Programme Department. The department monitors the construction schedule of the investment properties. The developer receives the money only when the next construction phase has been reported.
State control of investment properties helps to eliminate cases where an investor loses money because of unscrupulous developers.
The minimum investment amount for a property in the Caribbean is lower than for a Turkish property. Investments in Caribbean properties are allowed from $200,000 or more: enough to buy a share in a five-star hotel or resort complex.
The investment amount is pegged to the US dollar only. The main currency in Caribbean countries with citizenship programmes is the Eastern Caribbean dollar. It is pegged to the US dollar at a ratio of 2.7 to one. This means that 1 Eastern Caribbean dollar is always equal to US$0.37 and never changes.
More second passport options. The Turkish passport allows visa-free travel to 110 countries, including Japan, Singapore and Hong Kong. But the list of visa-free destinations for Turkish citizens does not include the most sought-after destinations among investors - the Schengen zone countries and the UK.
Caribbean nationals can travel visa-free to the Schengen area and stay in any country in the region for up to 90 days in a six-month period. In the UK, they are allowed to stay without a visa for up to 180 days per year
Subsidy to a state fund as an alternative to real estate investment
The Caribbean countries and Vanuatu, a nation in Oceania, offer a simpler investment option for obtaining a second passport: a contribution to a government fund.
The amount of the contribution ranges from $100,000 to $200,000. It depends on the country and the number of family members of the investor who receive a second passport under the investment programme.
The contribution to the government fund is a one-time and non-refundable fee. The investor transfers the amount of the contribution to the Citizenship Programme Department account and receives a second passport in two to three weeks for the whole family.
The option of contributing to a government fund is the most popular among participants in Caribbean citizenship programmes for investment. In 2021 between 60 to 80% of investors opt for contribution so they do not have to worry about liquidity of their investments in case of volatility of currency, economic or political situation in the country and the world.
Client names and photos changed
Vyacheslav decided it was time to take more holidays and hand over the business to his sons. He wanted to travel around the world with his wife, to be treated abroad and to see his grandchildren, who are studying in the UK, more often.
The investor obtained citizenship in Antigua and Barbuda by contributing to the National Transformation Fund.
Immigrant Invest is a licensed agent of the Caribbean and Vanuatu citizenship investment programmes. If you want a second passport, seek advice from investment programme experts.