A few broken deals, a few good ones and a dip into some other areas.
Hi folks. Very brief notes here this week. I am trying to squeeze in a day off to enjoy some of the coastal scenery.
As a long winter finally seems to be giving way to spring, it might be a good time for an overview of what is to be expected in the Spring and perhaps a few comments (or rather, speculation) about the CBI program, which no doubt is of importance for many newcomers.
I see a very slow return to a new norm in the secondary market after the tumult caused by the currency crisis in late 2021. I feel sellers are gradually coming back to the market and the Lira, while by no means feeling comfortably settled, has at least seemed to reside consistently in the 13.75-14.75 band for the past 2 months. I suppose that is the best we can hope for. It provides some visibility and consistency, at least in that time frame of 10 days or so from when we put a deposit down and when we may realistically expect to close. This is vitally important when trying to close deals on the secondary market. Those of you who were with me in December likely recall me whining about the deals collapsing in like dominoes during that period. Even in stable times, such as the past week or ten days, we had several deals collapse, through no particular fault of our own. This a a feature of the landscape on the secondary market where sales often are a family affair, with multiple inputs. Even when it is not a family decision, Turks often wonder if they are letting go of a safe haven asset too cheap. So, for newcomers, you just have to expect this. Up to 70% of the properties we negotiate on never make it past that phase. Maybe they raise the price or pull the property of the market. Maybe the agent is not fully competent or mis-represented the willingness of the seller. In any event, in these cases, we just have to move on. It is inefficient and slows us down and sometimes wastes the valuable time of our clients. We do our best to minimize exposure to this, but it is not always preventable.
In any event, I do not think we will return to a year ago when there were many more options to choose from, but I do expect the spring to be better than the winter for properties coming on the market. I also expect that we are in for a bit of a pause for the increase in prices, though some gentrifying neighborhoods may still plow up further.
Usually the key components needed from the buyer for locking in a good deal are 1-certainty about choice 2- preparedness (deposit money in place, no dangling paper work) 3- working knowledge of the market to the degree where you have matched it up against some comparables.
There does not to be much new in the new build category. Or at least not in Zone 1 or core downtown. I suspect sourcing land has become almost impossible, as has ‘kat karsilikli’ deals when owners make a share agreement with a developer. High rents will only exasperate that, as the developers often make deals where they pay for the rents of owners for up to 30 months during the evacuation and construction stage. Lack of visibility on materials costs might frighten off the more risk-averse developers. Cowboys will always be cowboys though, so I expect some are pressing ahead with ambitious plans. Some caution on “holes in the ground” with flashy CGIs and multi-lingual staff in sales offices is required
As many of you know, I have been spending time on some of the main ports on the coastal trail. The main rational for this is that 10-20 percent of our clients are quite interested in those markets. Having some idea of the pricing and the types of opportunities available seems like a good idea. I will give a short summary of my views on Alanya, Antalya, Bodrum etc. in the zoom session next week. They are all quite specific markets and can easily be highly influenced by idiosyncratic, and perhaps temporary events, such as a sudden influx of Russian buyers and would-be tenants. This means that many of these markets might be on steroids at the moment, so you have to temper the exuberance of the headlines with some sober thought. It does appear, at least for the time being, that rents have actually experienced a 50% increase due the Ukraine conflict. Welcome news, no doubt, to anyone who bought previously. It gives pause for thought, though, for incoming buyers. Are the new prices being asked being calculated with this inflated yield in mind? Resort towns have much different dynamics than places like Izmir or Istanbul. Get on the wrong side of the fad and you could get squashed and it could take years for your investment to realign. No amount of Russians coming to Istanbul or Izmir is going to move the needle much on property prices, but it certainly will in smaller markets such as Alanya or Fethiye.
On the CBI front, I want to state that I have heard no specific or credible news about any changes or termination of the the program. Zero. And nobody will…until there is real news. There is always lots of speculation.
Here are some of my thoughts.
-we may see some regions or municipalities introduce quotas on the percent of foreign ownership. Sisli and Besiktas come foremost to mind. Perhaps Fatih and Esenyurt. Members from our team have openly heard Land Registry officials grumbling about foreigners snapping up all of the property. There have been precedents for these kinds of quotas in the past, in Istanbul as well as many areas worldwide.
-There could be an increase in the CBI amount. It could be a way of limiting the number of new passports being issued, while keeping the currency flowing in. This is a slippery slope, as any meaningful raise in the amount would likely choke off demand considerably. Nonetheless, we must acknowledge that this is likely to be a conversation topic amongst policy makers.
-It seems remote, but possible, that CBI buyers may only be able to buy from new-build projects. The government could easily come up with the fig leaf; Turkey is a seismic region. I put this a bit lower down on the probability ladder, but still probably a point that has been considered.
-They might also impose a quota on percentage of buyers by nationality. This would seem to be a desirable move from the point of view of Turkish society, as it is in a way, an immigration issue. This is standard practice in countries world-wide.
-Eliminating the family CBI. Again, this seems unlikely. However, there could be political blowback if it leaks out into the mainstream press that 15 family members got a passport from a 250K investment, especially if you throw in some fraudulent practice to spice up the headline.
I would be curious to hear anyone else’s thoughts on the above or other possibilities that I have not mentioned.
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