Keith’s Weekly Property News Fabruary 13-2-2022

Heading into the middle of February, we have had a patch of Spring-like weather and quite a number of clients passing through. That is always a challenge as we try to accommodate the often very different needs and expectations, not to mention timelines and restrictions of every variety for viewings. This week, we felt that in a very pronounced way.
But hey, the Lira seems to be holding steady, almost eerily stable after such a period of volatility. As I have said many times before, this is crucial for us to be able to make deals. We need stability to be able to pinpoint value, estimate yields, and much more. Let us hope for a continuation there.

We are making steady progress, on the property management front. As I have pledged before, we will keep running multiple sessions on Thursdays until I feel we get it right. As there are so many issues to be resolved, I still feel we are about a month out from where I will feel satisfied. Selin, myself and Fatih will be holding a 2 day session to work out remaining issues this week. This is vitally important to me and we are committed to getting it right. We can only survive on the triage approach for so long. I cannot over-state how much of a challenge it is dealing with renovations, different building managers, utilities connection without proper POAs, neighbors etc. on a large scale. Somehow…still…every darn neighbor in town ends up with my number and the rich variety of strange complaints and requests that pop up on my whatsapp are pretty staggering.
As always, we are operating in an ever-changing landscape and we need to act fast to catch deals as well as see&evaluate new opportunities. Unfortunately, the Izmir Blue project that I had been promoting has practically sold out before we could really even capitalize on it. They have also increased the prices on remaining units due to what they say has been overwhelming demand. I do not doubt it in this case. Pity it had not come on my radar 3 months back.
If I had any doubts that there has been a surge in demand locally, those have now been put to rest. I put a non CBI compliant property (owned by my foreign client) on the market last week. I had to take down the listing and re-think after I got 10 calls in one day. I did what I hate people doing to me….I raised the price. The first actual viewer made an offer and we are now about to close. It is going for 15% more than I thought it should have. We might have been able to get more, so I even wondered if I had done right by my client. We went ahead, as he let me know there was a bit of a rush. I have another such property that I will put up for the local market only next week, so I am pretty curious how that will go. As most of my clients who have already bought are likely not considering selling for years to come, this may not be that interesting. For me, it is quite fascinating.
What might be of more interest for those who have bought and for incoming clients is the state of the rental market and particularly how yields are holding up. Yields have been a bit of a dirty word for me since the currency crash occurred, but they cannot be ignored for long so I will dive in with some real-life and fresh examples. Some of the numbers are slightly rounded for ease.
2 data bits for you from current rentals done last week.
Property purchased in Summer for 800 K TRY (USD was around 8). Complete reno for around 25K USD, 80-85 sqm, 2 bedroom apartment. 125K USD all in.
When I did my rental estimate, I expected around 5000-6000 lira monthly. We signed on for 8000 lira monthly. What can we extrapolate from this? Indeed, the client may have taken a hit on the yield, but nowhere near as bad as I would have thought. USD appreciation took out some of the yield pop, but not as much as I had feared. Still, we need to worry about where the Lira goes from here, so I am by no means taking a victory lap.
Another take away from this? Well-renovated properties are in short supply. I am sure demand for rentals in new build projects is also very high for those coming online.
I believe the above will be fairly representative for properties bought during the most part of 2021 and newly entering the rental market. Of course, with some regret, there were some rentals signed pre-currency crash where, retrospectively, we had rented out at too low a rate. But that is purely with perfect hindsight.

New build property purchased in October for 185K USD, approx 1.85 million TRY at the time. Old tenant vacated at the start of February. New lease signed at 9400 TRY, or just over 700 USD. This yield is fairly typical, better even, than yields for most new builds and not at all bad in light of the ensuing currency shifts.
We will have several more rentals coming up soon, so we will certainly be suggesting starting out at higher prices and being a bit more patient. In any event, the rentals will go very fast unless we have grossly over-done it on the ask. Also, I am getting a better feel for the yields now that the dust is settling again -squirm in my chair lol- so I suppose we may again be able to discuss yield projections.
The big question mark in the surge in demand for rentals is why is it happening. Does anyone have any idea on that? I think Covid just drove up the rents and then they kind of just seemed to keep going. They are still quite cheap by European standards, but they must be getting very painful for many Turks. In situ tenants, as a result, are hunkering down. We used to be able to incentivize them to leave on purchase by offering a few free months of rent. No more. That is a whole other story.

Istanbul Airport, despite its many detractors, is the busiest airport in all of Europe, proving that the relative openness of Turkey during Covid has made it a top destination. I can only imagine how tourism will look this year if the same trend continues. It will be an absolutely massive year, Even at this time of year, the city seems to be bursting with tourists. You might want to book your Airbnbs early.
Speaking of Airbnbs, we will be holding a workshop in about 2 weeks for everyone who wants to go that route. We will give some idea of nightly rates, our fees for management, and much more. We will have a new staff member who is completely dedicated to the project.
Property links to be shared in zoom session.

Keith’s Weekly Property News Fabruary 6-2-2022

It has been a slow start to February. The drought on the properties we like to buy continued. Of course, we are snapping up a few deals here and there, but I feel there has yet to emerge a pattern or a general “re-set” in the market post 2021 currency crisis. It still seems to be formulating itself. This makes for a prevailing caution in our approach. The currency seems to have stabilized, though that has been far from compelling, with constant fear-mongering that it is going to blow up at any time. There are also those on the margins predicting the Lira will suddenly surge in value. Potential peril on both sides there for buyers. Therefore, our approach remains largely the same: only going for what we feel fairly certain about.
The Izmir Blue project has been selling very well on the local market. If anyone wants to jump in on that it might be well to do so before unit quality/availability closes the door then. Again, panoramic sea views in excellent, gentrifying area 1 metro stop from core downtown in a premium, blue chip project are the selling points. Safe haven play for CBI, with an upside.

I often take pot shots at Property Turkey, but this week I decided to give them their due. They took on the subject of the somewhat paradoxically rising prices (even in USD terms) of the Turkish real estate market (read: mostly Istanbul) and they also acknowledged that it was hard to find property.
For the full video, which I encourage you to watch in conjunction with my notes below, click here:”&HYPERLINK” ab_channel=PropertyTurkey

Cameron and his sidekick always provide a few laughs and give a pretty rosy picture of the market. They are trying to sell properties en masse, so we do expect to receive news towards the upbeat end of the spectrum. That is not to say; however, that their analysis is wrong. I feel they often get it right. As I spent the past 6 weeks or so pulling out my hair as prices rose even in USD terms, watching their timely video actually helped me work through a few things. There are some reasons why prices are going up. Fundamental ones. And we would do well to acknowledge that. We really also do have to keep in mind that Istanbul is a major global city. Anyone who say, compares it to their hometown of Halifax, Bratislava, or Naples, will be missing the whole point. Certain types of real estate and certain prime areas in Istanbul can get Beijing type high sqm prices. That is just a fact. It pretty much always has been, or at least for as long as I have been here.
There are also pockets of deep value. If you want to go into an area highly sought after by elite Turks and buy the best property there, you should be comparing it to cities like Rome, Barcelona, Dublin or Prague, if not Hong Kong, London and Paris. There is a high concentration of multimillionaires in Istanbul, billionaires as well. Pretty much any wealthy Turk in the whole country or even one of the many millions who live abroad, own a property in the city of Istanbul, and usually only in a handful of neighborhoods: Moda, Etiler, Nisantasi, Bebek and so on. If you are expecting the price to be 2-3K for prime locations in those areas, you will get a rude awakening. Keep in mind there is limited supply and quite a bit of demand from very high net worth individuals. Add in a Bosphorous view and you might be adding a zero or two.
I guess my point is that, being a mega-city, Istanbul has all types of real estate and at all prices. I read a lot of comments lately on whatsapp and other places about when is the best time to buy. Nobody has that answer. Believe me. I like to keep it simple. As a frequent buyer of Istanbul real estate over the years, when do I buy? When I see something that makes sense to me. It really is that simple. I do not overcomplicate with macro-economic analysis, political events that may or may not happen, or the movements of the currency, all of which I have shallow knowledge. Everyone has their own method. Some people read hundreds of articles and buy nothing. Others keep searching til they find what they want. Some come for a holiday and check out a few places and others buy the first thing that they see.
Now back to the Property Turkey video. I will note the points where I feel they have got it right and also where maybe they fell short or I disagree with their examination of “Why are property prices going up in Turkey”.
I look forward to your opinions as well, so please do watch the video (though do not click “like” lol)

Cameron hammered it home….DEMAND. This is absolutely true. Turks have been locked out of the market due to high borrowing costs the past few years. Borrowing costs have been decreasing, yet are still very high. As long as they are going downwards, demand will continue to grow. There is real pent up demand. Fact.
In addition, many people are moving to real estate as a safe haven. More demand. While not very profound statements, they go a long way to explaining the apparent conundrum of rising USD prices in the real estate market.
Availability of land. They also got this entirely right. Obtaining buildable land, particularly in the city center, is very challenging and prices have pretty much always steadily risen.
Build costs have gone up. Another bulls eye. Iron, steel and some other product costs have increased dramatically.
Culture and mindset of young Turks is to buy real estate. Correct there.
Again I think Cameron gets it right when he demonstrates how Istanbul is still cheap compared to other global cities. Of course, much of this can be explained by the purchasing parity. Nonetheless, his argument was well-constructed.

Where I disagreed with Cameron or expected a bit more.

They acknowledge that their large team is having a hard time finding properties for clients. They talk about rising prices, yet neglect to mention that many would be sellers likely remain on the sidelines during this tumultuous time. This is an enormous factor. In my opinion, we are not likely to see restoration to a new norm until many sellers come back to the market. Right now, very few people want to sell. That also contributes to higher prices. They did not mention that at all, so a deduction there.
Cameron says there is no “right or wrong time” to get into the property market or real estate more generally. Well, I believe that is untrue. I always hear that old adage and each time I cringe.
I am sure the millions who lost the shirts off their backs during the subprime meltdown in the US in 2008 would disagree.
If you buy at the peak before a crash, you may never recover that loss or it may be a very, very long time.
Is that Istanbul? No way. People can barely get loans. But keep your eyes on the numbers. Some neighborhoods may be over-heated and though a crash may not be imminent, they could have peaked.

In all, I found this to be one of their better videos. We have to keep in mind they also tend to focus on up-market, new build properties, so no doubt that many of their latest projects, which are probably not much more than a hole in the ground, are the subject of fairly dramatic price increases. I have some anecdotal evidence that they are doing lay offs. No doubt. It will be interesting to see how it all plays out in the comings months. The only thing we can say for near certain is that there will be many surprises and twists in the plot. In my view, the biggest drivers in all of this, whether north or south, will be local demand. Keep an eye on borrowing costs locally. If these go down, you might get swept away if you are shorting the Istanbul property market.

Property Links to be provided in zoom session.