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

The Neighbourhood Watch

As I’m sure we all now know, Istanbul is fast becoming a vast metropolis on a scale
only matched by the world’s biggest cities. This can become a headache for
the-would be property buyer as it poses the question of where?
Where indeed?- In our experience, it’s best to start in the center, as with
a ripple in a pond. It is no real surprise that the centers of the world’s
major cities are usually the most valuable, New York/Manhattan,
London/Mayfair, etc. The out-skirts of cities have their own potential and
can often, in the good times, outstrip the performance of the historic center,
however, in the down times it is downtown property that most often holds its own and
resists the dip. This most definitely rang true in Istanbul in 2009.

oh.....I get it..

I find visuals always help….

Once you have made the decision to target property in the center of Istanbul the
overwhelming nature of the city becomes more manageable and smaller
neighbourhoods can be identified. If we take Taksim Sq as the center then
immediately south we find Beyoglu comprising predominantly of the
neighbourhoods of Cihangir, Galata and Tarlabasi. Go South again across the
Golden Horn and into the ancient Byzantine town and heavy tourism with the
neighbourhoods of Sultanhammet and Balat. North of Taksim we move into Sisli
and Besiktas with some very upmarket neighbourhoods such as Nisantasi.
Finally further North into the expensive modern semi-suburb neighbourhoods
in Levent. All of these neighbourhoods are accessible and within close
proximity to (or sitting on) the historic sites, the Bosphorous and
nightlife. As with other International cities, the very fact history is
within most of these neighbourhoods adds integrity and long term capital
value to real estate.

The bit we're talking about

The bit we’re talking about

But which neighbourhood suits you best? Is the purchase for lifestyle or purely for investment? – Over the next few weeks I will take a detailed
tour of each separate neighbourhoods mentioned above and what I consider to be the
highlights and qualities of that particular city zone. This will be a unique
exercise and will offer an exclusive insight into their separate cultural milieus,
local flavoring, my take on their history, the pros and cons of actually
living there and finally (when buying istanbul property) the ‘all-important’ what you get for your money in terms of square meter pricing.

In time I will progress this “undercover” behind the scenes survey to other areas of the city
but for the moment we have more than enough to be getting on with.

Cihangir will be our starting point. keep tuned in.

www.lilimont-istanbul-realestate.com

The advantages of working with one real estate agent

Istanbul is a massive and sprawling mega-city that can be very hard to grasp for first time visitors. It can also be quite challenging to get from one end to another, if there ever really is one end or another.
If you are considering purchasing property here, the logical first step is to research and find an agent that shares a common language with you. As you probably have a finite time, be it a week or two, to find the property you want, it is best to start out with one agent that you have created a long distance relationship with and see where that gets you.

Try to find an agent that has a grasp of your needs, but be under no illusions as it’s up to you to outline your wants pretty clearly, agents are not clairvoyant . For non-resident clients, as an agent I like to have a pretty firm budget in my hands and at least a general idea of location (city center, outskirts, European side, etc). Also, any information on physical characteristics of the property is useful; is a view a necessity? Historical building or new? Also, before putting in a lot of research, an agent dealing with offshore clients would usually like to know how the property purchase will be funded. These are not meant to be invasive questions, but rather serve to limit everyone’s loss of time.

So, you have fulfilled your part, now what should you expect from the agent? If you have arranged a travel date, they should state clearly that they will indeed take you to view some of the properties that you have selected from their website and give you some idea of how long it will take to complete the viewings. A good agent will help you wade through the bureaucracy of the actual sale and contract and then help with after sale issues, it then becomes apparent that you are getting good value with the commission. It’s worth noting that a good Istanbul based agent will most probably run rings around a generic agent from London.

Maybe steer clear of this guy

Maybe steer clear of this guy

It is also important to be clear and discuss up front the associated fees of a completed transaction (be aware of anyone who is not transparent in this regard).
The agent should also disclose all potential problems there may be in a particular property…is it in a zone where foreigners can buy? Is it residential or commercial? What are the issues, if any, with tenants? Property problems come in all shapes and sizes but do not dispare as these are not likely to be dissimilar to issues seen in the Western world.

If you feel the agent is showing you properties that are close to fitting the bill, but you haven’t found exactly what you are looking for, don’t be shy about asking the agent to contact another agency for alternatives. If you try to do all this by yourself, it can lead to a great loss of time and can be very unproductive, as someone who you have not been working closely with will likely just try to sell you what they have on the books and not necessarily what you want. They may drag you half way across the city to show you a 2 bedroom, when you specifically asked for a three bedroom.

If your agent feels you are a serious client, they will likely go the extra mile for you, and you will have seen more properties that are to your liking in a more efficient manner. Ultimately, it helps to do a fair bit of research prior to arriving in the city and to have at least one person you feel that you can begin to work with.

My kind of agent!

My kind of agent!

Even though I mainly work in Beyoglu, if I feel good about the client, I’ll gladly extend my search to other areas.

www.lilimont-istanbul-realestate.com

2013 What lies ahead for Istanbul Real Estate

After a steady but unspectacular 2012 for Istanbul real estate, many investors are wondering what is likely to happen in 2013. Although I do not claim any great prescience, I think that if we analyze the trends it looks very positive for the Istanbul property market to accelerate its upward trajectory.

One of the the main reasons for this is the reduced cost of borrowing now being offered by Turkish banks, which is mainly the result of positive developments and signals from the big ratings agencies.  As loan rates plunge, the length of mortgages can be extended, thus increasing purchasing power. Of course, rates are still hovering around 10%, which seems quite high to people from the western world. However, it is much lower than it has ever been in Turkey and it seems that these will go lower yet. This opens the door for a lot of new possibilities; people will be able to buy to let as the monthly mortgage payments may more easily be covered by expected rental revenues. In addition, those who have been on the sidelines as renters, may also get fed up with rising rents and calculate that maybe it is time (for those that can raise the down payment) to take the plunge and become a homeowner.

All good fun but don't do the Western 125% of value thing!

All good fun but don’t do the Western 125% loan to value thing!

Another positive headwind would appear to be a potential avalanche of demand coming from the Arab world, as buyers from there seek a liberal Muslim haven from the instability in their own countries. All of the above are new developments and cannot be guessed exactly as of now, though they do seem to be trends that are not going to recede any time soon and which may in fact gather steam. In short, if mortgage rates further decrease and there is brisk demand from the Arab world, it should signify a dynamic few years for Istanbul.

I've heard this guy wouldn't mind a pad..

I’ve heard this guy wouldn’t mind a pad..

The overall state of the Turkish economy will also play a key role in the direction of prices. The estimates seem to range from a low of 3%, with the OECD leaning to a more optimistic 4.5% (keep in mind that the US is spluttering along at around 2%, Europe just above zero and the UK is now possibly falling into recession yet again) If the Turkish consumer feels confident that the economy is humming along, there will be an increased demand for housing, which will probably be felt most acutely in the city center, due to traffic congestion and high energy prices for the outlying suburbs.

So, what does all this figure to suggest for the investor. I think we could expect double digit capital growth, with some very nice upside potential.

Happy hunting in the New Year!!!

www.lilimont-istanbul-realestate.com 

Negotiating and purchasing property in Istanbul

I just want to make a few notes here on subjects that frequently come up in discussions with clients. It may seem like basic information to people experienced with the Istanbul property market.

In essence, the process of buying a property for a foreigner in Istanbul is relatively straight-forward, though there area few areas that we should give special attention to.
So, after scouring the streets and having done all your homework, you have found a property that suits you. Normally, at this stage you would enter into negotiating the price of the property. As you know the market by now, you will have some idea of the value of the property. Turkey, like all countries, has norms for negotiating.

Buying a property is quite different from buying a rug in Sultanahmet, where prices can be  wildly overvalued and negotiations can start at 50% or less than the asking price . Professional real estate agents will usually not keep things on their books that are very overvalued, as it would only lead to a loss of their time and energy running around with clients. In my experience, you may be able to get 5-10% off the asking price and your estate agent will usually have a pretty good idea beforehand where the price could end up. Any property that is 20% higher priced than the market price should definitely be considered over-priced and should be avoided, and it is probably not even worth entering into negotiations as it is a sign that the seller is not realistic.

haggle till you drop in the bazaar

haggle till you drop in the bazaar

There are also properties which are very clearly priced to sell, and we should not expect wholesale discounts on those properties. Again, generally speaking, I find it useful to make the initial offer 10% under the asking price and see where that leads. The important thing as in any serious purchase is to negotiate in earnest. If you reach the magic number that is in your head, you in a sense should ‘feel’ committed, even if you are not yet legally or financially (InTurkey, you do not put down any money to enter into negotiations, though that, too, may change in the future).

Usually, I will ask the potential buyer what number they have in their head, and If I feel it is not realistic, I will dissuade them from making an offer that is too low as this will probably end in a waste of time.

Not as interested in your low offer as you may think..

Not as interested in your low offer as you may think..

Now, if your offer is accepted, it is quite normal for a small deposit to be paid quite quickly after that. For this deposit agreement (usually around 5% of total purchase price) you must outline the time frame and general conditions for the sale. In the case for foreigners, permissions must be obtained from the military, so we always put in a clause that the deposit is refundable if for whatever reason permissions are not granted (though I have never heard of such a case).

Get the wonga out

Get the wonga out

At this point, we suggest that the buyer contacts a lawyer and has the lawyer review the deed to check if it is ‘clean’ or free of any encumberances.
Once the permissions are received (anywhere from 4-8 weeks), both parties can proceed to the land registry to transfer the title deed, which only takes an hour.

Of course, there are many variations on the above information (such as purchasing off-plan, etc), but most clients fit into the above scenario.

If anybody would like to share their purchase experiences with me, feel free to drop me a line.

www.lilimont-istanbul-realestate.com 

The currency factor and Istanbul real estate… A carry trade?

The importance of currency levels will be a well-known point to many international real estate investors. And that attests to its importance.

The world goes round

The world goes round

When we use dollars, euros or the GBP to purchase a property in Istanbul, for example, what we are most likely implicitly hoping for is that the Turkish Lira strengthens against the currency used for purchase. Of course, at the time of purchase we would be hoping for a weak TL.

This is, in fact, what has occurred over the past year and a half. İn 2011 the TL was the worst performing emerging market currency, to firm slightly in 2012.  As it is still off 25% on historical averages against the USD, this represents a significant buying opportunity. As İ have said before, there is a giant For Sale sign on the garden of Turkish real estate, and Turkish assets more generally. This kind of opportunistic purchase could be viewed as a carry trade of sorts. İn the local press, there is an ongoing story about Mrs. Kobayashi, a stereotyped  Japanese housewife investor who has a fondness for buying Turkish Lira, which offers a high interest rate. Not too surprising, considering that Mrs. Kobayashi would receive pretty much zero percent if she left it in a Yen savings account. She converts that yen to Tl and gets a relatively handsome interest rate and prays also that the TL performs well against the Yen. İf that occurs, dear Mrs. Kobayashi will have done very nicely. Not without risks, but a popular currency move, nonetheless.

Mrs Kobayashi when she's not do the school run

Mrs Kobayashi when she’s not doing the school run

So, in the ideal Turkish property investment scenario, you buy when the Tl is weak, rent out your property for 5 years, after which period capital gains are exempt, the Tl strengthens and you get good capital growth through purchasing wisely. İn this scenario, it will be an excellent investment. Though, it should be noted that timing is crucial. Most analysts would agree that if you are fully committed to buying property in Turkey, now would be as good a time as any to convert your currency into TL to take advantage of a weak TL ( a strategic devaluation by the Turkish Central Bank to remain competitive for exports).

On a cautionary note predicting the falls and rises of the currency markets is fraught with difficulties that defy basic economic understanding. The property bought should have its own investment fundamentals as relying on positive currency movements as the sole reason for investment would be a game plan that even the best analysts have difficulty predicting. To highlight – It is worth noting that a little over 4 years ago eminent economists were scratching their heads trying to understand why the dollar was strengthening when the world was falling apart… it is now taken as granted that the greenback jumps when the markets drop as it’s seen as safety of the last resort. Not many of the great and the good predicted that!

However, Turkey may just possess one of the few property markets where you can achieve a 100 % percent investment return over a 5 year period.
İ believe all pretenders in Europe have long since abandoned such optimism. To put it in to risk context, buying real estate in Istanbul is a good strategic safe investment without the currency upturn as the economy is bouldering along well, however, add in a bit of positive currency tailwind and you could have yourself a eye-popping return without the need of leverage!

www.lilimont-istanbul-realestate.com