New Era in Property Tax Base: Construction Costs Officially Gazette

With the publication of the General Communiqué on the Property Tax Law in the Official Gazette, the construction costs that will form the basis of the taxes property owners will pay next year have been finalized. The regulation, prepared jointly by the Ministry of Treasury and Finance and the Ministry of Environment, Urbanization and Climate Change, reveals how cost increases, particularly in the luxury housing segment, are reflected in tax bases.

Tiered Cost Hierarchy in Residential Classes

The new communiqué aims for a fair distribution in taxation by determining the construction costs per square meter in five different classes according to the quality standards of the buildings. The calculations for cost limits are shaped as follows:

■The square meter cost for luxury constructions will range between 12,642.67 lira and 27,712.26 lira.

■First-class constructions will be evaluated with a minimum of 5,335.40 lira and a maximum of 18,532.07 lira.

■The range for second-class constructions is determined as 3,758.56 lira to 12,555.79 lira.

■Third-class constructions will fall within the 1,269.61 lira to 8,551.49 lira band.

■Simple constructions will be evaluated within the limits of 604.1 lira and 3,856.64 lira.

Reference Update for Commercial and Social Facilities

Not only residential structures but also cost indices for commercial hubs and public spaces have been updated. The square meter normal construction costs for special-purpose buildings such as factories, hotels, hospitals, cinemas, banks, schools, and pools have been rearranged in line with market conditions. This update will directly affect next year's cost projections for both commercial real estate investors and business owners.

Fatih Kılıç: Historical regression analysis conducted by my desk confirms that the increase in the construction cost index shows a high correlation with CPI data. The figures in this communiqué reveal that property tax bases are updated not just with a nominal increase, but with the real inflation of sectoral input costs. Investors must incorporate the pressure of this potential over 50% base increase in the luxury and first-class segments on their cash flows into their models.