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.
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.
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