This past week we just slammed on the breaks. We cut back heavily on our daily property tours. We focused mainly on new listings from 3-7 days, and the offerings were bleak. Nothing looked actionable and, when we made the calls, the picture was even grimmer … .owner had Covid, somebody’s dog ran off with the key, tenant was uncooperative, or, rather more frequently, the price had been raised.
I think I made it til Wednesday before throwing in the towel, moving my focus away from sourcing properties, towards the many emergent growing pains that have been brought about by the sudden CBI stimulus that probably really only began to be felt by me just a little over a year ago. During that time, I felt very in touch with, and even in control of, every organizational aspect of my business. We had a very small team and a manageable load in every respect. My whatsapp had not become a battlefield and the idea of not running the daily show was unfathomable to me. I was often having long discussions with new clients and I felt positively energized about the period ahead. We had a steady, if unsensational, flow of clients and I was spreading the word enthusiastically about my new passions Mesrutiyet, Kurtulus and Merkez. I was sure prices were about to surge and indeed, since that time they have, in lira terms.
I was jumping on zoom sessions with anyone and everyone who wanted. Sellers increasing their prices mid-way was unheard of. I would have just hung up on them. Fast forward a year. Now I find myself coaxing and wheedling them to reconsider.
As the Lira rattled around the 13-14 band most of the week, all assumptions and calculations from the past year seem to have gone out the window. The property market has been making a lot of sense for me for the past 1 and a half years at least. After the declines from roughly 2015-2018, I felt we had seen a real bottoming out and prices were again very attractive, yields were in sync and all was right with the world. Alas, in Turkey, getting too comfortable is usually a perilous stance, at best. If nothing else, Turkey teaches adaptive strategies.
President Erdogan has doubled –down for real this time and waged an all out war against high rates. This time, none of it seems contrived. I feel that literally everything is now on the table. Now, we just wait for the cards to be revealed. It is that tense moment in every poker game where the winning hand is about to be laid down…read ‘em n weep.
Does Erdogan’s widely critiqued economic policy, often dubbed ‘unorthodox’, bring Turkey to her knees or is there an outcome other than what seems to be the inevitable? Most of the analysts that I follow are prognosticating doom: runs on banks, food shortages, and riots.
In light of the above, it is little wonder we temporarily put the brakes on.
I have too many numbers not making sense rattling around my head. What if the Lira goes to 20 or beyond and my clients buy in at this level? What kind of price increase in Lira is acceptable…10%? 20? Surely, we cannot accept prices to follow the dollar the full way up, or 40% in the past few months. That just does not make sense to me. What the heck does yield even mean in this context? I know I will get past all this and do some mental re-calibration and be looking hard at the new listings on Monday to see what sort of value there is to be squeezed out of what is on offer, or perhaps reviewing the old stock to see if something suddenly makes sense.
A note on renovations.
Although I am very removed from the day to day operations, I personally review all of the estimates and spot check for prices or any inconsistencies. I have always maintained that we carry out A-Z renovations, with all fittings, for approximately 300-350 USD per square meter. This has not changed at all. In theory, I would expect that the price may be slightly lower in USD terms than this, as labour costs will not have increased so much. However, there is zero doubt that we have experienced large lira increases for materials. For future renovations, we will ensure that there is Lira and USD equivalent given at the outset. You may want to consider converting the hard currency in tranches to protect yourself from increases. I am going back through a few of the estimates where clients have been caught in the middle of this unprecedented swing, and seeing where the actual price increases have occurred. This is a time consuming process and often easier said than done, but I should be able to illustrate in further detail some time this week. If I have time before the meeting, I may take a case in hand and review it entirely.
The new build market
Developers seem to be in a bit of a bind. In very real terms, their costs are skyrocketing and they will, as much as possible, want to pass that on to the consumer. However, the full brunt of it cannot be borne by the consumer. I expect a slowdown in the sector and for prices to stagnate during this time. There should be some opportunities there for USD holders, so we will keep a close eye open for that. As I outlined last week, we are going to steer clear of projects with a long delivery date. As always, we will be mindful of the ‘wall of local affordability’. If we see Turks buying somewhere, we will be trying to buy there, too.
I looked at some listings after I wrote this. Some hope has been restored. The mission to find value amidst madness will go on. We can make some good deals this week. I am sure of that.
Property links to be distributed during zoom session.