Keith’s Weekly Property News April-2-2023

Ramadan Kareem!!!!
Ramadan is the holiest time of the year in the Muslim faith. Practicing muslims fast from dawn to dusk for a 30 day period. It is an incredible feat of discipline and self-abnegation. Just try it and you will see what I mean. In addition, Ramadan is a family time and the pace of business slows down much like it does over the holiday season around Christmas. As a result, much travel and many economic decisions are delayed until after this period. In the last zoom session, I mentioned about post-earthquake malaise in the market, but I neglected to mention the impact of Ramadan. For Airbnb properties, which have cooled off in the past few months, I believe we will get our first true glimpse of how things will be going forward by the middle of April. If the numbers are still lacklustre, there can be some cause for concern. Likely we will see a pretty sharp rebound, as the only headwind has been the earthquake and I do not see why that would have more than short term impact. The elections coming up only affect the local market and should not have any impact on both sales to foreigners as well as tourism flows. Nonetheless, the great tragedy of February 6th reverberates through the nation and much does not feel as it did before. After the rampant inflation that has been keeping everyone on edge, the sheer destructive capacity of the earthquake has been a cruel addition to worries and anxiety of every day life.
It is hard not to bang your head against the wall some days when you are dealing with Turkish real estate agents. About half, at best, are highly competent, engaged with what they are doing, seeking to understand the market of their focus, and keen to do the best for all parties involved in a deal. Amen. Those are the guys and gals who make it possible to get out of bed in the morning. Unfortunately, the other 50% are completely inefficient, for lack of a better euphemism. Their gross incompetence leads to hours and hours of wasted time, of the clients, of lawyers involved, of sellers and more. We often wonder why they are in the business at all. Myself and Tiger have a few choice expressions for them. I save them in my phone according to their own particular vice…”dimwitCan”. “timewasterAhmet”, “sleazySuzy” and so on. It saves me time not answering their calls. However, unfortunately, the market is so fragmented that hundreds of these people pop up on the scene every year (and often disappear just as quickly). They rarely have good connections with the sellers, so getting even the most basic information is pulling teeth. We may get a title deed or some info about the tenant. Floor plan? Dream on. A proper discussion on the sqm pricing in the neighborhood? Forget about iiiiit. Accurate measurements of the property? 50-50% at best. Accurate pinned locations? Only if it suits them, or it is a Monday, or god knows what really. Every problem is completely solvable, until in the 11th hour, when it is absolutely not solvable.
Yet, we do have to deal with these people due to our peculiar position as a “buyer’s agent”. We primarily became a buyer’s agent over the last several years with the CBI. Most of our clients buy the property and hold for at least 3 years, but much more likely 5 years (and longer, we hope). But this basically means we have very little portfolio of our own, so we often have to reach out to these “fly by night-fly by the seat of their pants” agents. Luckily, we have been around long enough we have a pretty good network of agents that we enjoy working with, yet again, due to the fractured market, they often don’t have the property we need at a particular time. Enter the clowns. It is a huge drag in our efficiency, primarily because negotiations and all the pre-sale stuff we do takes a lot of time and to have it all come crashing down at the final moment before laying down a deposit, usually because some critical fact has been either selectively or negligently omitted, is a huge disappointment for both our clients and for us. If we are in that late stage work it means we believe in the property and we want our clients to buy it. We are pretty aggressive, as we have been through every dance move before and we know that obstacles can crop up at any moment that will either kill the deal or reduce its attractiveness. We want to get this out in the open as soon as we can, but sometimes the deliberate obfuscation prevents that. That is why I always caution patience and realism. No matter how good and smooth it looks like things are going, a deal only has a 50% chance at best of moving forward prior to legal due diligence, valuation reports and so on. Owners raise prices. The older brother comes in to quash the deal, the tenant who was supposed to sign a departure date at the notary. balks. The agent sells to a higher bidder. Take your pick.
So much has changed in the property market in Istanbul and Izmir in the past 2 years that I could easily write a book about it. I think back to the winter of 2021 when on the non-renovation side of the business (i.e. sales and everything else) it was just me and a part time student running the whole show. Yet, it was a much easier time. Tenancy issues had not clogged up the system, and we liked a lot of the prices we saw. We had what we called “Wild Wednesdays”, where, just for a laugh, we would have viewings of 10 or even 12 properties in a single day. Our record was 18 in one day!!! It would take us a month to get that number now when we filter out the more aspirational pricing, tenancy and tax issues, etc. My day, somehow, seemed so simple. I would wake up very early, like 530. Answer emails and whatsapp messages. Contact a bunch of agents to put together viewings, hit sahibinden and try to flush out the viewings list for the day. By 11 or 12, we had the days’s viewing list and I would usually share the duties with aforementioned student. We did not even have a massive amount of clients that winter, but fast forward a few months and we regularly had large crews showing up mid-day to join the viewings tours, and always eager online buyers following along virtually. People would show up at MOC café looking for help opening bank accounts, asking where to get best crypto rates, where to get diapers, and where the best live jazz was. Pretty crazy, indeed. At that point, of course, we hired many more staff and that trend continued for the rest of 21 and towards the end of 2022.
Now, we rarely have more than 1 or 2 clients at a time “in country” and, post-covid, the online frenzy has dropped off (though does remain a feature of the real estate market much to my surprise). Property management absorbs much more time of course. Nalan handles the bulk of that work with unparalleled tenacity. This was also an unusually slow winter and we certainly took our foot off the gas, but everything seemed to be pushing us in that direction. Anybody who has spent any time around me probably knows I can be pretty curmudgeonly about what I feel are high prices, and I do feel that has been pretty rampant in late 2022 and early 2023. Add to that, the now-rampant intransigence of tenants further slowed us down. I mean, we had so many negotiations break down on this point, after so many hours put in. It just became a frustrating and entirely new element for us to deal with and a new layer of uncertainty that left an unpleasant after taste. Finally, February 6th. the twin earthquakes. Whatever animal spirits we may have been able to muster, met concrete reality of the destruction and havoc that was wreaked on the country in the space of 12 fateful hours. With that, came new waves of uncertainty, self-doubt, introspection, and melancholy. The rubble has literally yet to be all removed (estimates are that will be completed by late April). How this evet would affect the property market was very unclear, but what was clear is that it could have far-reaching implications. In this environment, abundance of caution seems the best approach, even if it means we have to choke off sales and throttle back on offers we make to clients. We believe there will be a day when the animal spirits come back to the fore, but on this early Spring day, it is too early to say we are there.
Clients also relentlessly ask me, is now the time to buy? 2018-2021 I was giving out raging “buy” signals. 2022 I entered a period of scepticism, particularly in the latter half. 2023 has been a continuation of that. Then I questioned myself and these assumptions. We did plenty of deals in 2022, so how did that match with my scepticism? Last night, quite fortuitously, I got my answer. I was watching a youtube video trying to make sense of the pervasive financial gloom and doom caused by inflation and rising interest rates. After getting mind-fu%^ed by the King of Gloom, Nouriel Roubini, I switched channels and by chance hit a video with Charlie Munger, the lesser-known right hand man to Warren Buffet. He was talking about market timing and what he said rang quite true. Nobody can time the market very well. That is just a myth. Just as it is a myth that there are rock star hedge fund investors who always outperform the indices. My guess is if you just stuck your money in a tracker of one of the indices you would outperform most hedge funds, mainly because their fees eat up your bottom line. I have certainly heard those arguments. Anyway, back to topic….
Munger says, “My way in life is not in predicting the little short term differences between the Russel Index and the Standard and Poor’s Index. I do not have an opinion about which index is better at any given time. I never even think about it. I’m always just looking for something that’s good enough to put Munger money into it.”
So, time to buy or not? If you can find something worth putting “Munger money” it, go for it. In the Turkish real estate market, there is almost always something of interest. Unfortunately, at times, you just have to dig a lot more for it. That’s a bit of animal sprits returning.

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