Keith’s weekly property news May 29-2022

Again, I will keep it brief this week due to time constraints.
I will get right to the point. We are facing major road blocks in getting deals done on the secondary market. Below are the list of factors that are creating a kind of perfect storm of turbulence while trying to close down on a property. As some of the subjects are not ones that I really want to commit to paper, I will not go into detail about them, but make oblique statements from which you may infer what is happening.
In every deal, there are multiple components that must align to bring matters to a successful conclusion.
Valuation process
Receiving appointment at Land Registry and signing to take the deed
Sometimes additional paper work is required prior to the sale. Maybe permission from the Cultural Affairs office or the Historical Properties foundation.
These days everyone is well-aware that there is a bit of a rush to get citizenship purchases done. For all of the above, we have to navigate a complex web of demands and compromises. We are pretty used to this from the past, but the nature of the requests have fundamentally changed and it impacts us very negatively. We want to close the deals, but not at all costs. We want to get them done in expeditious manner, but that also leaves us prey to opportunism in the above 3 steps. That is about all I am willing to say on that subject. It is tough going. Time-consuming. Frustration meter running pretty high.
We have more compounding complications, which are:
1-The rising USD. Keep in mind that properties, by law, cannot be advertised in USD. So do not be at all surprised when you go to negotiate on a property, the agent tells you the price has been raised. Likely, this is a mirror reflection of dollar rise. As I have always said, look at the whole number, “all in” costs. Does it make sense? Is it favorable in comparison with the market? Do not worry about who pays what, in terms of stamp duty, etc. Focus on the whole number.
2-Intransigence of tenants. The new phenomena of the past year. Tenants do not want to leave. This issue is very different from past years. I have mentioned this at length previously.
3-Inflation. This is taking a heavy psychological toll on the Turkish people. It is also a real mind blower for me. I have never witnessed such an event, in any country. It creates a sense of fear and panic which is palpable. For many Turks selling their prized asset, it is potentially a life-changing decision and we have to be aware of that. It leads to indecision which can lead to the collapse of deals. It happened a few times last week and a few times the week before. Our ratio of deals gone bust has gone up meaningfully in the past few weeks. There is not much we can do about that. Say, you have successfully identified a property and have completed the negotiation. I give the odds of bringing it to closure at about 50%.
We have to assess the risk in each case individually, often trying to glean insights from our partner agencies regarding the seriousness or intent of the selling side, which is further compounded by the fact that the selling side might involve a family decision. Big brother might weigh in and squash the deal at any time. We have developed a pretty good “feel” for this process, yet still, at times, we get surprised.
Lack of supply. Even Property Turkey must be feeling this. They really do not even have any new build projects in the core downtown area at all. Most are in far-flung suburbs and the prices look pretty spicy. Of course, the secondary market supply is much less than what it seems when you skim through the real estate pages. As I have always maintained, at least 80% of what you see on the internet is not actionable, for a host of reasons.

For all of the above reasons, we are definitely considering June 3rd to be the cutoff date for signing deals on the secondary market to catch the 250K CBI. For the new project market, we can extend that to about June 8, so obviously our focus will shift to that in the coming week.
Having injected enough of my pessimism into the discourse on the current market, let me end on a high note. I think this summer will be very interesting and I am optimistic about opportunities cropping up. I predict that I will have more time to deal 1 to 1 with my clients. I imagine many fewer clients, but more quality time with those clients. That had always been my modus operandi prior to especially the last few months, but also back as far as a year ago. Stick around and I am sure we can do some good smash and grab jobs in this market, as we have done so regularly in the past. WE will be at more leisure to sift through the market and separate the wheat from the chaff. I will be contacting all of the clients who fit the above bill, one by one, in the middle of June, but feel free to reach out to me and confirm your intent to either move forward with general property investment or 400K CBI investment.
A short sampling of properties will be shared and analyzed in meeting tonight plus strategies on how to close with lightning speed. In these times, blitzkrieg approach can be most effective if you want to close out at 250K.
Properties will be distributed in meeting. If you like, PM me and I will send them to you directly.
We invite you to join us for:

IstanbulInsights with Keith

On Sundays at 20:00* Istanbul time
*13.00EST/ 19.00CET/
20.00TRT/ 02.00SGT (Monday)
Via Zoom:
https://us02web.zoom.us/j/7931208182?pwd=ZndocVNmbXAyTE5uMnNscC9sK0xSZz09
Password for logging in: 1234
‘Just Click’ the above link and be part of the Istanbul Insights with Keith’s property market updates.
Every Sunday we will share more info about the best property deals of the week, market developments, followed by Q+A time.

Keith’s Weekly Property News May 8-2022

There was a major and unavoidable slowdown this past week with the Eid Holiday making viewings for the most part impossible. We will be resuming our regular viewings this week. It came at an inconvenient time as many clients are keen to get on with their CBIs.  
We had several negotiations going on in the past week, as well as some completions of purchases. The negotiations seemed slow, with owners calling most of the shots. The USD is near the psychological barrier of 15, so perhaps that was a factor. In general, prices seem to have leveled off. We are still, sporadically, seizing on good opportunities and fair pricing, though nowhere near the number of properties we would like to be closing on. It takes patience from all parties. We cannot just push through deals that we feel are not there. It will be reflected in subsequent yields and bite into future appreciation. We want at the very least to get them at market price, if not a little below. In the past 18 months, nearly 90% of our transactions fit that, so it is pretty hard to let that go. However, we have a couple of ready made CBI packages, that while not stunning, are very reliable and ensured and designed to protect your capital. Rather than do something rash by going out and over-paying elsewhere, contact me if you are interested in one of these. We like to call them “bullet-proof” and I believe to a high degree that they are. 
Regarding proposed CBI changes we know very little, nor does anyone else. The only thing I can say is that I am surprised that the announcement has not yet officially been published. We really expected that it would have by now. And we continue to believe that it will be imminent. What we surely do not know are the details about implementation. As always, once we have credible information we will pass it on to you right away. 
In geo-politics, Turkey continues to thread the needle between the US, Ukraine-Russia and the EU. So far, we can say that this is having the net effect of restoring Turkeys image as a major and responsible regional power. I think Turkey relishes the opportunity to be both a peace-broker and bridge between many countries. It is a bit of a tour de force in demonstrating how Turkey operates as a swing state. Lose Turkey and you can lose the Middle East, even Africa and the East as well. President Erdogan, who was being reviled and shunned by EU leaders just a few short years ago, is now back on their speed dial. Nothing like a war to make new buddies. As group member Anton speculated, EU companies have been encouraged to increase already large trade with Turkey. 
On the tourism front? It will be the biggest year ever. Turkey has two cities in the top 10 in world tourism, Istanbul and Antalya. The numbers this year will be unheard of. If anyone has some preliminary numbers from, April, it would be great if you could share in the meeting. This is both good for short and mid term lets. Im always a bit hesitant to be over-exuberant about things, but I just cannot see any storm clouds for Turkish tourism. In the mid-2015s we had some high profile terrorist attacks that did a lot of damage, so we have to temper our enthusiasm with hesitation about the unknowns. Having said that, at the moment, tourism roars forward. 
 
On the property front, we are seeing some difficulty in our traditional target areas of Beyoglu, Besiktas and Sisli. Other neighborhoods can pick up the slack, but only to some degree. Many of our clients insist on one of the above neighborhoods. Kadikoy , another favorite, has been plagued by very unreasonable seller demands, so it is mostly a pass there. We continue to look at Golden Horn areas, Kagithane, of course, and lately, Eyup. Izmir remains on track, but has also seen a thinning out in opportunities. Karaburun looks set to be an excellent alternative to Cesme. We have an exemplerary property there that I am keen to move on. I will present that tonight. Alanya also remains on the radar, while Antalya and Bodrum are clearly off. 
A couple of lovely sea view properties in Fatih fell into my lap last week, but the negotiation has gotten bogged down due to the issue of tenancy removal. A few times lately, I have been suggesting to put the property before the rent. By that I mean, if you are getting a good deal on the property, you may want to accept the existing tenancy status and then raise rent aggressively in accordance with inflation. I was not a huge fan of aggressive raises in the past as I somehow felt that both tenant and owner should bear some of that pain equally. However, with rents that have fallen well behind market, I am in favor of pursuing the full inflation raise. This might deter tenants from staying and allow you to re-set at market rent. These are in many ways new problems and we are being forced to adapt and try to find new solutions. Keep in mind that the majority of properties on the secondary market are tenanted. They do not just come all packaged up with bows tied. It is up to us to somehow make it work, whether it be by recourse to local laws or perhaps incentivizing (on both seller and buyer side), the tenant to leave. Unfortunately, this slows down the negotiation process at a time when we do not want it to. 
Just a few thoughts on sqm prices. All quotes are from “decent, but not prime” locations in their respective neighborhhods. 
Mesrutiyet, starting at 1.5K USD. 
Bomonti, starting at 1.7K, but moving to 2K. 
Kurtulus. 1.25-1.6K 
Tesvikiye, starting at 2K. 
Cihangir, starting at 2.25K 
Galata, starting at 2.5K 
Kadikoy, starting at 2.5K 
If you find these prices high, you have likely been duped by property adverts puffing up the net sqm. The above numbers can be considered to be quite reliable. At the upper ranges, you may expect a bit less renovation, perhaps a view of some sort etc. At the lower range, you may expect at least moderate renovation. For new builds in all the above areas, add minimum 40%. For Bosphorous views, add minimum 50% 
 

Properties will be distributed in meeting. If you like, PM me and I will send them to you directly.
We invite you to join us for:

IstanbulInsights with Keith

On Sundays at 20:00* Istanbul time
*13.00EST/ 19.00CET/
20.00TRT/ 02.00SGT (Monday)
Via Zoom:
https://us02web.zoom.us/j/7931208182?pwd=ZndocVNmbXAyTE5uMnNscC9sK0xSZz09
Password for logging in: 1234
‘Just Click’ the above link and be part of the Istanbul Insights with Keith’s property market updates.
Every Sunday we will share more info about the best property deals of the week, market developments, followed by Q+A time.

for more information:
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