Keith’s Weekly Property News August-20-2023

Keith’s Weekly Property News August-20-2023

It has been almost a month since the last zoom session. In a month, a lot can occur in the Turkish property market and it is part of our role to monitor and relay these changes as best as we can. Often it is anecdotal analysis, based on discussions with people in the industry, every day people, Following sales figures, tourism data and other trends is also a large part of getting a clean snapshot of the current state of the market. I feel it is important to do this, both to keep older clients in the loop, but also to assist newcomers in getting a feel for where things stand. I always try to be objective and often do not bother sugar coating things. My only real aim is to stimulate some discussion on the property market, and especially in the zoom sessions. Some of the best ideas are generated from those who participate in the sessions and it often informs my practice, gives me new ideas or new ways of looking at things. So I thank those who regularly or even infrequently attend.
Slump, pullback or crash?
Where do we stand in the Turkish property market as a whole? Data shows that sales have eased off for the past 5 months, with a few sources claiming up to 44% year on year reduction in the number of units sold monthly. This is a rather meaningful drop. Local affordability and loan tightening by the banks seem to be the main reasons for this. A drop in sales figures for a few months probably will not immediately have a big effect on prices, but 5 months is really signalling that something is going on. Prices will inevitably follow those figures in the long run. If sales numbers drop, so will prices. I don’t see any other logical outcome. And indeed, we are starting to feel that, particularly on the secondary market. Developers in the midst of a new project are hemmed in by the high costs they are encountering. Yes, sure, some of the list prices are pretty far-fetched, but one gets the feeling those are soft and if you walk in with a serious offer, it is hard to imagine them turning you away. Nonetheless, they still will not be very low. In addition, there are almost zero new projects in traditional core downtown. It seems every project on the outskirts is now a “luxury” project and not what I would call cheap at all. It seems to make the margins work, one has to inject luxury into it. That was not always the case and it begs the question, do many of these locations support such an abundance of luxury projects. Pretty clearly, to me at least, is that they do not. Otherwise, we would market them more vigorously. I mean, we are certainly not opposed to them, but I do shy away from 3K per sqm in areas like Buyukcekmece and Kucukcekmece. I would approach with a high degree of caution this type of property. Do I really expect a crash? No, I really do not. I would give it a less than 2% probability. I am still sticking with my “pull back” thesis.
I prefer the term pull back to slump as it suggests a more active movement in the pricing, and that is indeed what I would expect. It has certainly begun and I feel it will continue for quite some time. Fall and winter could represent some real buying opportunities, although September might see a “dead cat bounce”, a time when there is traditionally a big surge in real estate activity, both in rentals and sales. All in all, 20% seems to be the number that keeps popping into my head in terms of price decrease. 15% minimum and in many cases we may already be there, though it is not uniform across the board. There are still deniers and stragglers and optimists. The extended grind down will get rid of some of the overly-aspirational and fiction-based pricing that is at times rampant on the listings pages, an inefficiency and distortion that is a grand waste of time for all involved. I know many owners who say, “Ok, I will sell when I get this price” and the price is so far above market that it is not even worth going around to photo it up. Alas, there is always some realtor somewhere willing to take on the baggage and waste their own time, as well as that of others. In short, as this all plays out, it is a good time to be scouring listings, interacting with me or team member and trying to see what shakes loose. The Winter is wise.
Long term, mid-term and short term rental markets
Starting from a few months back I was bemoaning the sluggishness of the long term rental market. That has changed and it is starting to look more robust again. September will see a huge increase in demand for both furnished and unfurnished units. If you are really struggling running an Airbnb, this might be your time to transition to longer term model. Mid-term is in under-supply, so that can be another potential avenue. Even if you are not one of my active clients, I can always offer my thoughts on this if you familiarize me with your property. It seems that rents will go up modestly, brightening the yield picture somewhat for incoming buyers. Around the elections, the 30% fall in the lira was a yield migraine. New rents will claw back some of that amount, but probably only half. Turks just are willing to pay so much for rent. Still, for the properties we want to be pursuing, I see 5% and 6% as pretty achievable. In some cases, much better than that. This absolutely does not apply to lifestyle or the luxury segment, which almost goes without saying.
For short term, tourism numbers are booming, as they almost always do. I can hardly remember a year when records were not smashed. Yet Airbnb bookings are not as solid as they were in the past 2 years. The only conclusion to draw here is that over-supply is creeping in. I have gone into this many times in the past few months, so I will just leave it at that. It is a natural cycle, but one that is susceptible to distortions – developers looking to pump up possible yields by pulling out impressive charts showing rosy returns – whether or not they materialize is not really relevant to them.
Property management
5 or 10 years ago I viewed property management as a necessary evil and in fact, I often out-sourced to others. But we have made huge strides in our operation and now with Nalan’s- as well as others- herculean efforts, things are running smoothly and we are aiming to fine tune everything so that our clients get the best service. I view it as essentially a “cost recovery” effort but one that will somehow pay off down the line with client satisfaction. I had to invest quite a bit out of pocket to get it up and running, but I am overwhelmingly satisfied with the current state of matters. The plan is to get even stronger with the digital presentation on the back room of your properties. So much is disseminated through WhatsApp, but that all needs to be collated into a strong and user-friendly digital package. So, you will see positive changes there in the coming months as well. Ultimately, each client will be able to have their personalized login and access any and all of the documents, information and details of your property from tax payments, insurance payments, property expenditures, to regular updates from me about matters relevant to your property, including income projections, void targets and even estimates of ongoing maintenance costs. That will put us at the top of what property management companies offer in Istanbul, though we are nowhere near the top in terms of size. That’s ok, Im happy if we punch above our weight class. We have to whip PT at something lol. Suffice it to say I take property management very seriously, even to the point of considering it existential. If you park your property with us, you can be sure it is constantly being reviewed, discussed and optimized as far as possible for your profitability and peace of mind. IF you feel you are not getting that, blast me out in CAPS on Whatsapp, or better yet, call me late Sunday night and give me an earful.
The coastal areas
I spent quite a bit of time scanning for value on the coastal areas in the past few weeks. Tiger has also been doing his part and likely will share his views on the zoom session. It would be nice to have a color coded map with red, green and yellow. But if I were to sum it up, I would say that areas like Alanya and Antalya are still red. Prices are very out of whack. Bodrum has pockets of value, so I would say yellow there. Areas like Seferihisar, Urla and Karaburun are something like green, though Urla may have peaked for the time being. Mersin is green. I have not really looked much into Fethiye, but it is never an easy place to come up with something of really good value. Dacia remains unexplored by us. Canakkale is always an area you might want to look at if your budget is a bit lower, though the swimming season is definitely shorter. Its accessibility by car from Istanbul makes it a growth area in the Turkish market. Also, regrettably, many Turks are now being priced out of their own holiday destinations. Canakkale offers opportunities for lower cost holidaying for those folks and it has plenty of charm.

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