If ever there were any doubt that we were in a full-blown currency crisis, last week put that to rest. As the USD lurched past 17, Turks let out a mutual gasp of horror. The USD had doubled in just a few months, with most of the damage in the past 30 days or so. Now, looking forward is of no use; nobody knows what will come day to day. In a bold move, the minimum wage was doubled almost overnight, a move that did nothing to revive hopes in the currency. Anyone who has debts or commitments in USD must feel this rather acutely as their burden would have exactly doubled in a short span of time.For our little corner of the world, downtown Istanbul real estate, it has indeed caused havoc. Most of the budget properties are snapped up right away as Turks seek safe havens and the overwhelming majority of sellers are sitting on the fence. Many, of course, have been raising prices, but that hardly matters as it seems unlikely that they will find buyers, foreign or otherwise. In my 15+ years in the market I have never seen anything like it, have never witnessed such a paralysis. We make 50 calls and we end of with two viable and real sellers. That is surely an all-time low. As I have said in previous weeks, there needs to be a stabilisation period before some sense can be made out of what is happening and for the market to return to whatever kind of new norm it will be. There was certainly no evidence of that this week.
There were articles highlighting record numbers of sales to foreigners, and perhaps there were, but one wonders where those properties were being sold. I would imagine that would be bargain hunters snapped up what appeared to be discounted properties in developments in the far outlying reached of the city. The kind of properties that had been virtually unsellable a short time ago probably became irresistible for a certain segment of buyers. But what kinds of yields will they produce? What are the future prospects of some of those locations? It is anyone’s guess. It is more like gambling than real estate investment purchasing in those remote areas where transportation to the city is a vast and time-consuming endeavour Also, probably those stats were bolstered by numbers of sales on the coastal regions where property values often appear to be cheap and particularly so these days. But anyone who knows the coastal areas knows that good locations there are often expensive and largely is a hard currency denominated market. Nonetheless, it is a fact that more Turks than ever are buying right now. They fear housing prices, along with everything else, will soar. I have not seen the breakdowns but I would imagine the first-time buyers are also at record levels. Given all of the above, we should certainly expect to see rather large Lira increases in pricing. In the end savvy USD holders should experience some benefit from the chaos.
We also must link our contracts to USD at time of signing if we want to hold deals together. In a nasty twist fate, work at the registry and with valuations all appears to be much slower these days, so our average closing time has jumped from 7-10 days to perhaps 20 days, which is more or less an eternity these days with ever-changing landscape. Stabilising USD price with deposit agreement is a must use tool these days. Speeding up the processing of deals is largely out of our hands and the waits can be agonising, knowing full well sellers can back out at any moment after a lot of effort has been put in to get to that point.
As some solace, I try to take a long term view on matters. Will you still be able to purchase real estate in solid downtown locations for under 1500USD/sqm in 3-5 years from now? If so, surely this will be the cheapest global mega-city in the world to purchase real estate, probably on par with downtown Quito. Does that even make sense? If the past few weeks had not knocked the bravado out of me, that would be a bet I would still take. I think it will prove to be true, but a lot of patience and fortitude will be required to ride out the storm.
In this environment, writing anything with an optimistic note would seem an act of oblivious madness to what is going on around. All I can really muster myself to say is that I have experienced every kind of crisis under the sun in my tenure here in Turkey. Somehow, Istanbul real estate makes a come back each time. Is this an existential crisis for the country or for the property market? I just am not sure. Will it result in profound and hitherto unthinkable changes? Also, I just am not sure. Rather than making sweeping claims to having any of the answers, as is the fashion with this little community, I am going to float the above questions and the essential dilemma to the group and see what we can come up with collectively; a collective response to the current maelstrom that we, in one way or another, all find ourselves in, being Turkey lovers, hard-nosed real estate investors, or simply those seeking Plan A/B/Cs in favourable climes.
I am sharing far fewer links than usual this week as there is a strong likelihood that many of these will be invalid by the time we hit the phones tomorrow.
Property links to be distributed during Zoom session.