Keith’s weekly property news October 21-2021

My brief period of exhilaration and satisfaction at a job well done gave way to fret, discontent and worry mid-week as the Lira crashed past 9 and picked up pace meaningfully towards 10. That dark period of my life, say 2014-2018, when the house price increases in Lira could not match the depreciation versus the USD, left many of my clients underwater and not thirsty for much more investment. Yields got flattened, foreigners were leaving in droves. My Turkish clients shelved their investment plans and I was too Beyoglu-centric.

Bundled in political uncertainty, some headline grabbing terrorist spectacles and the botched coup attempt, I was left with a decimated client base. I even packed up shop and went to Budapest for a year. But Budapest is no Istanbul. So, I returned. I knew I had to stand my ground. Unfinished business.

With a tanking Lira, lots of political uncertainty again, slipping into a pessimistic frame of mins is pretty natural, but it does not get you out of bed in the mornings.

After doing a lot of soul searching this week, I decided that the best way to approach this was to look at the numbers and see if there was any teflon in the strategic approach I took in 2018, shifting a great deal of my focus to neighbourhoods such as Nişantaşi, Meşrutiyet (an old favourite), Kurtuluş, Merkez Mah, Bomonti, and more recently, far beyond. Was my theory holding water? If we bought at -10% on market, added value (10-15%) and took in good yields + property appreciation in our target neighbourhoods well in excess of the meek 3-5% I had conservatively been estimating- would we be afforded some measure of protection?

Could we at least mitigate the depreciation of the Lira? My gloomy ruminations gave way to a new resolve. So far, my fight to protect the money that had been entrusted to me has me up on the scorecards after a few rounds.

So far, the model holds up (no victory lap here, folks, as there are years ahead). A look at a few examples from 2021 only and assuming a baseline USD of 7.50-8.00. These are just representative cases, though naturally, I have put in a few headline grabbers.

1- Kurtulus 2 BR: purchase 650.000 lira reno cost 250.000 lira. 900.000 lira. Current market value: 1.4 mil Lira.

Outpaced the USD. USD gain.

2-Bomonti 1 BR. purchase 720.000 lira. Reno cost 160.000 lira. Current market value 975.000 lira. 6.5 % yield.

Underwater a bit.

3-Bomonti 2 bedroom. purchase 950.000 lira. reno 325.000 lira. Current market value: 1.9 mil Lira.

Easily outpaced USD. USD gain.

4-Mesrutiyet 2 bedroom. Purchase 800.000 lira. No renovation. Current market value. 1.1 mil lira. 6.75% yield.

Outpaced the USD. USD gain.

5- Merrutiyet. Home office. 1.8 mil Lira. No renovation. Current market value, 3 mil. Very high yield.

6- Kurtulus. 1 bedroom purchase cost 540.000 lira. Ron 170.000 lira. Current market value 890.000 lira. 6.75% yield.

Outpaced USD. USD gain.

7-Kurtulus 2 bedroom. Purchase 875.000 lira. No renovation. Current market value, 1.4 mil Lira.

Outpaced USD. USD gain.

These are not cherry picked and, apart from a few stand-outs, are fairly representative of the many properties we have sold in the past year. I suppose if the Lira depreciates another 25% in the next year, or week, I will start to get a little twitchy again. For now, I am trying to remain calm. There is a prestige factor in owning real estate in Istanbul, and if you are in it for the long haul, as I certainly hope you are, I believe many storms can be weathered. The partnerships and close working bonds I have formed with so many of my clients is a constant source of motivation, especially when the chips are down.

Deal-making was brutal this week. Negotiations were laborious and dragged on over days, with gaining traction a real chore. I was constantly on the phone trying to patch together deals that were hanging on by a thread due to the currency situation. Sellers were rightly apprehensive. Afraid to change to USD, afraid to keep in Lira; often stuck with low-paying tenant vis-a-vis the current rental market.  One thing is for sure; there is a palpable sense of crisis, but probably it hits the property market last. Turkish people, above all else, view real estate as the primary investment. Also, not with a rate cut, it should stimulate borrowing. I certainly do not see prices going down and I also see no evidence of bubbles forming. Actually, the outlook for real estate investment in parts of Istanbul looks quite favourable. On that positive note, let us shift to the real subject of interest;

Property links distributed during weekly zoom session

Keith’s weekly property news October 17-2021

The information gap

Probably this week, more than ever, I realised that there is a lot of information clients need to be getting, but that it is hard to disseminate, from online banking to CBI regulations to information about POAs and lawyer selection to the valuations process to how the deposit and closing process works.  As it is actually a wealth of information, I think we will create a large FAQ database. I think we will just start off with ‘Online Banking’ and ‘Closing costs and deposit process’. As our closing process is a bit unique (I put down deposits on maybe up to 50% of our deals), it would be good to lay out how that all works.

Staff + Sales

This week, we hired two university educated design students to help Angie with the renovation projects. For renovation projects, if clients want extra detail we can do the 3D projects for them in-house, so it will be more cost-effective.

With these 2 new additions we now have 8 full time employees plus countless construction workers who form the core of the team. Arman (The Tiger) has also joined the team in a free-lance, but important role; giving 1 to 1 service for clients in buying position, or in imminent buying position.

How that usually works is I set up a whatsapp group with Arman + the client and links are shared, views are shared, calls are made (when needed) and I am in the loop and often jump in with comments. When we are in the closing position, either myself, Selin or Arman handles the negotiation. I view the property before we finally sign on. If you want to start such a 1 to 1 service, contact Selin and she will arrange. I might have 1 more individual to assist with that if demand is strong. I think it is very useful for clients in that position, so do not be shy if you fit in that category.

With our new capacity, we should be able to source many more property options, as the 2 new hires will also be sellers. Basically, everyone on staff helps with sales; from Selin to Arman to Angelina.

Regarding sales, they remain brisk. I estimate 4-5 per week, on deals usually starting at 400.000 and going up to 3 million Try. This month was heavy for renovation starts; 7.SD and impact on marketAs Lira slumped to 9.26, many deals in progress felt some degree of stress, particularly a few where we had to extend closing due to POA delays or other paper work delays. Also, the 10 % slide in less than 3 weeks caused some chaos for CBI buyers, with a few buyers slipping under the 250K mark when they had a comfortable cushion just a fortnight ago. I suppose it is a good thing, but it requires dexterity on our part to come up with solutions.

As for the sellers, no one has returned us our deposits yet, so that is good. However, our negotiation power is severely diminished. Given the fact that we are already inherently targeting good value properties, the chances of getting much discount, do not look good. In the past, we were always able to negotiate, but now it is much harder. Often we are happy to secure the properties at near asking price. Many look to be quite nicely discounted for hard currency buyers and are way cheaper than they were even 8 years ago.

MINT group purchase project:

We completed the first sales on Friday and should finalise the remaining sales this week and next (we still have to wait for several POAs to be issued. We received great news: the sales were exempt from Stamp Duty as the units fall under the ‘Urban Regeneration’ program. Add 2% savings to the 16% off list price that we got and then also consider USD rise and we are looking at an impact of anywhere from 20-25% less. Mint has given us two more units on very decent floors, so any last minute buyers can still jump in and benefit from the discount. Inquire with Selin for more info.

One to one zoom sessions

Last week was a heavy week on all fronts and I had to cancel a few zoom sessions. To compensate, this week, I will host 8 one to one sessions of 30 minutes as well as the usual 3 semi-private sessions (which are great if you just have general questions). Times will be announced tomorrow, Monday.

I feel like I could write forever today, but as always, it is a race against time. But it would be amiss if I didn’t pass on this observation. I was sitting there in our lovely apartment, with stunning views, renovated by my wife Angie, being tenanted by my CEO Terry (the lowest paid in history haha), and surrounded by so many great people with a common purpose and vision. Apart from building my business back from the ashes of post-coup 2016, I realised that I had a part in building a community that features such an interesting mix of maniacally driven and delightful people. All real characters; mostly with awesome senses of humour. I will not give names, as they are too numerous to list. I don’t want to dip into self-aggrandisement, but I will say that I felt a surge of pride. Thank you, again.

I also hit the group limit of 256 for a Whatsapp channel participant. I didn’t even know that existed. Thank you to Andreas, the brainchild (er…father) of Istanbul Insights, the best marketing tool ever. 

I need some feedback tonight on how to better utilise the channels. ‘In Country’ is pleasantly chaotic and perhaps ‘Insights’ is perhaps too reserved.

For people who are new to this, these are the functions of the channels:

Insights is a 1 way, non-interactive channel where I distribute quite randomly about 1 property video per day. It gives a snapshot of what is available.

The country’s main function is to showcase the properties that we view every day. There will be some ‘dogs’ as we often view them for first time. People can jump in, and often do, to make comments on the properties. I also make regular comments. If you are an imminent buyer, you should probably be in this group. There is also a lot of other traffic as people discuss any issue under the sun, but mostly property, or tangentially, Istanbul-related developments. Sometimes, it’s just to share a laugh. I love it, but feel we may need to make some changes in how these groups function. Open to feedback.

Tiger’s eye (comments from the field by Arman)

Due to the exchange rate rıght now market ıs almost ın favour of sellers not much negotiation works and as sellers are receiıng offers everytıme they tend to resıst on theır initial sellıng prıce leavıng the market or addıng tax and sales expenses on to the seller sıde addıng to thıs tıme zone dıfferences and avaılabılıty of clıents, lawyers makes communıcatıon more tıme-consumıng and diffıcult. Closıng seems to be harder than 3 months ago as they have a tradıtıon of linking the value to USD so negotiation works the opposıte sometımes and seller uses these breaks we need for communıcatıon wıth clıent and lawyers as an opportunıty to add condıtıons or change theır mınds. 

Editor’s Note: I like speed in closing. Hit them with a reasonable offer and push them to accept a deposit. Give them less time to think it over.

Property links distributed during weekly zoom session

Keith’s weekly property news October 11-2021

The sizzling summer heat has given way to a moody and rainy period here in Istanbul. Nonetheless, the property hunt goes full steam ahead. Last week saw us dipping our toes into Beyoglu, Besiktas, Kagithane, Zeytinburnu, the Asian Side and all corners of Şişli. We found surprisingly good deals, but got some scrapes and bruises along the way. It is pretty much inevitable that not a week goes by without some form of conflict or the discovery of some new oddness.

This week I put my property on the market – sorry not CBI compliant, folks; I bought from seller who could not declare full price and I inherited the cap. gains burden- and I started getting lots of calls. As always, there are good agencies and bad. But there is a new k,ind of agency, it if can even be called that – that calls owners who are selling property by themselves. Two of these agencies called me in this short 1 week time. Basically, they offered to sell my property at 10% higher than full asking price. I was intrigued and wanted to know more, not to take advantage of their offer, but to figure out their game. Well, as it turns out, they market these properties in places like Dubai and add on 15-25% and maybe ‘discount’ them down to +10%. To get in on this, you obviously have to agree to pay them the 10%

This is bad on many levels. Terrible for their clients, who they are not even attempting to negotiate on behalf of and at minimum overcharging them massively on the commission. But the worst part is the possible damage it can do to agencies, particularly ones that are nominally foreign ones. Selin informed me that she dealt with several agencies who thought we might be running that kind of scam – and they even asked for a cut if we did a deal together!!! Ludicrous, of course, but you can see how it creates havoc potentially. I did not record the numbers last time, but I will be if these agencies call back. I suspect they have their offices in Dubai and Qater, so probably not much can be done about it. They are super pushy, fast-talking and over-confident. Not at all a pleasant experience doing business with these people.
And I do worry about the possible effect on the market. Probably this strategy works quite well in places like Esenyurt, where prices are very low. I am guessing that these agencies are very active in those neighbourhoods where the owners are relatively poor and susceptible to these scams.
Never a dull moment on the Istanbul property scene.

Filmed a youtube video with Ladislas from Wandering Investor today (www.wanderinginvestor.com . Always great to have him in town. He is the ultimate numbers guy and can spot a good deal when he sees one. Very no-nonsense approach. I recommend you visit his site.

I will be hiring new staff this week and would like to offer a new service to clients who are in buying position or will be so imminently. We will set up a whatsapp group for you (I will also be on it) and we can share properties, information, etc. As many of you know, we already do this, but perhaps newcomers were unaware of that.

Here are a few properties that were sold or had deposits in from past week.

1.3 mil Try, 130 sqm. Şişli central. (partially renovated

700.000Try 120 sqm, Fatih (unrenovated)

675.000Try. 50 sqm Meşrutiyet (unrenovated)

1.7 mil Try. 180 sqm. Meşrutiyet (unrenovated)

400.000 Try. Şişli central.

1 mil Try, 115 sqm, Meşrutiyet (unrenovated).

1.2 mil Try. 90 sqm. Ferikoy. Renovated

Property links distributed during weekly zoom session

Keith’s Weekly Property News October 3-2021

There has still been a lot of chatter about how the legislative changes on how the valuation reports are done and how it will impact the property market and CBI. For the secondary market, I feel the effect will be very muted, if at all. For the new-build market, it looks like it will generally cause a 10-20% increase in the amount CBI buyers will have to spend, though certainly some projects may not show any price difference. We will research what those may be. Keep in mind, it may not necessarily mean these are better projects. There are a lot of factors and unknowns about that. It may also be that these projects have simply devised a ‘work-around’ on the valuations.

Nonetheless, interesting times. I sense an almost visceral reaction from Cameron in this video. I find it very odd he did not even touch on the secondary market, which property-wise, dwarfs the new build projects. Well, it is not odd at all really…

I also pick up quite a bit of ’spin’. I suspect there are a lot of frantic calls being made to try and patch up deals in progress.

We anticipated this a few weeks ago with our Mint bulk purchase. Due also to the Turkish Lira depreciation, we are having to supplement purchases with super budget properties (offices which we will convert to studios, etc) that are in themselves a great investment in order to cross the CBI threshold. The valuations look like they will come in at -10 to-15, possibly a bit better than industry comparables.

I could speculate endlessly on the reasons for the new legislation. A few things are certain. This aims to catch fraud by where people who were buying property for, say 175K, and having it written up to 250K. Definitely, the government would want to stamp that out. Probably, also the government would want to stamp out over-pricing that may occur when developers get too cosy with their ‘hand-picked’ appraiser.

Some other thoughts are purely speculative, but may have some elements of truth; it may be a move to secretly increase the CBI amount or at least to test the waters (or, in any event, this might be a side benefit). They could always ease off if it really chokes up the deal-making. Finally, it could be a measure to cool things down so the Turkish consumer has a more level playing field. On the much wilder side (and I do not really believe this), it could be a naked money grab where developers close to the government continue to get rubber-stamp evaluations, thus enabling them to do super-brisk sales. I would like to re-iterate that I do not think this is the case; rather I just want to bring up the range on the speculation that is out there.

Again, I am standing by my thesis that I feel, one way or another, we are going to see changes in the CBI program in the next 6-12 months.

Ok, as for non-CBI news. Market feels healthy. Some trend in rising prices and certainly in asking prices, but the point at which transactions are being made seem sensible. Still, I remain surprised when I hear some of the amounts that are being paid for Bosphorous view properties. They sit on the market for a while usually, but then someone eventually comes in and picks them up and I am always surprised at the price. I said to myself I would stop being surprised many, many times. Call it the ‘Bosphorous Effect’; it really is a unique and iconic view that in many ways does deserve a high price tag, but geeessss…….

I am going light on the links here this week folks, but what I have seen so far today gives me hope for the week ahead. It looks like it will be a zippy one again and we are revving up for it.

Property links distributed during weekly zoom session

Keith’s weekly property news September 26-2021

Another zippy week in the Bul pen, with lots of movement on all fronts including in the direction of the Turkish Lira which broke all time lows and ended up at 8.88 to finish the week, thanks to a rate cut by the CB. Once again, Turkish assets are on sale again. It is good news, but it must always be mentioned that this does little for our bargaining power with Turkish sellers who are ever-conscious of the USD level.
Very light on notes again this week, folks. Hope to elaborate on market in the zoom session.
I will start the evening off with a controversial one. Wonderful views and permission to build amazing terrace on top. Will discuss further in meeting. Price is too high, but…
Property links distributed during weekly zoom session

The Neighbourhood Watch – Cihangir

One of the must-see sights in Cihangir is the mosque that gives its name to the area. Sultan Suleiman commissioned the building of this mosque with the great architect Mimar Sinan. Legend has it that he built it for his son, Cihangir, who was often bed-ridden, so he could watch the ships pass by on the Bosphorous. The view is nothing short of stunning, if you have 30 minutes on a quiet day just go and sit there, you don’t have to do anything else. In fact, one of the very reasons for Cihangir’s rise to real estate prominence is the fact that the views are amongst the best in the city.

The location

The location

Cihangir is now one of the prime neighborhoods that have undergone dramatic change over the past 15 years. Once a rough and ready home to alternative artists and long-dwelling locals, it has been propelled into a well-known domicile for famous Turks and expats of all kinds, yet has managed to retain its essentially artistic core. Turkish soap opera stars and film directors are in evidence on every street corner cafe. The Firuzaga Tea Garden in the centre is all bustle but on the coldest of days. New cafes, yoga centers, pilates studios, and bakeries are now a familiar part of the urban landscape.

In the same vein as London’s Notting Hill and New York’s Greenwich Village, its property regeneration progressed slowly over a number of years. The government did not have money for extensive regeneration projects 15 years ago as they do now, and Cihangir has been alone in finding its feet. This organic process has been a positive as it has not attempted to direct it on any pre-determined route which can often leave a neighbourhood without its sense of community and history. In contrast, Cihangir is all about these values.

The Mosque with it's view

The Mosque with it’s view

The buildings, many of which are being restored or have already been so, offer flavours of Greek, Italian and French architecture, with high ceilings, bay windows, hand-made Turkish tiling, with the odd marble staircase. They tend to be reasonably sized and look quite elegant. As with a lot of Beyoglu and central Istanbul, Cihangir was mainly populated by well-to-do Europeans and Turks in the early 20th century who were often owners of the many trading businesses or worked in shipping, thus having the resources to create and decorate these handsome properties. The area fell into a 60-70 year decline through a myriad of political and economic problems, and only in the past 15 years has it rediscovered an admiring wealthy audience once again.

Wouldn't you want to live here?

Wouldn’t you want to live here?

Fancy

Fancy living

The café, bar and restaurant scene is possibly the best in Istanbul. An evening can start with cocktails in one of the hip bars or cafes such as Zenka with its cool ambiance, moving on to the White Mill Lodge and its great hidden garden and finally ending by getting down and dirty with the underground night crawlers at the infamous Mini-Music Hall!

So what of Cihangirs future? My view is that we will see a steady progression in property value combined with a slickness that normally wouldn’t be associated with Central Istanbul outside of Nisantasi. It is evident on view of local municipality works such as pavements and curbs as these tend to be of a better level and finish than neighbouring wards. Now that the community is moving back once again to its wealthy European roots and additionally with the influx of the Turkish media crowd the pressure is on to raise the local living standards. I have found properties for senior International execs both for purchase and rental in Cihangir, when at one time these guys would have been safely ensconced in Bebek or Etiler never to be seen downtown. The amount of large scale regeneration and infrastructure projects, such as Taksim Square redevelopment in the immediate vicinity raises the International bar considerably. My view is that prices will rise but without the aggressive energy witnessed over the past 10 years. Maybe we’ll see 5-10% year on year capital growth of property with a possible rental return range of 5-7%… not bad in a developed low-risk neighbourhood,  especially now that money can be well levered with a mortgage . Cihangir is here and is not going anywhere South for the foreseeable future!

If you like the sound of the above and you want to own property in Istanbul within a five-minute walk from the very centre, then you are probably not too startled to hear that prices start out at around 2000 euro/ square meter. Majestic Bosphorous view properties in prime location and well-restored buildings have been known to eclipse 6000 Euro/ square meter. The average price would be about 3000 Euro/ square meter at time of writing.

The rents start out at around 1000 Euro/ month for something smart, but not too large, whilst properties commanding the coveted view, of large size (140 sqm and above), and in fine condition can be upwards of 4000 Euro/ month.

www.lilimont-istanbul-realestate.com