Keith’s Weekly Property News August 28-2022
Every year. There are about 10 days where I hit the wall due to the humidity in Istanbul. This past week was that time. It passes quite quickly and then hopefully we will settle into that lovely, soft late summer, Indian Summer weather. The stifling humidity is no fun in a city with a population close to 20 million and often without AC coverage in taxis, shops etc. Luckily it passes quickly and life will resume. With the break in the humidity, return all of the droves to Istanbul. Usually, a pretty busy time in the real estate market, especially for rentals.
Due to the major social uproar in the costs of all forms of housing, the government has been aggressively marketing a massive new social housing project as a panacea to high prices. It claims that the effects of just announcing the project has already produced a softening in the prices. Personally, I think that is just politics. However, flooding the market with tens of thousands of much more affordable, subsidized housing will release some of the pressure. But will it be enough to curb the upward trajectory of prices? Due to the nature of the Istanbul market, each year needs a hundred thousand or more newly built properties. Many developers are staying, perhaps wisely, on the side-lines, in fear of unpredictable and rising build costs and an uncertain outlook for sales ahead of the 2023 elections. Nonetheless, the social housing project has generated some buzz and it certainly is a good thing that the government is at least attempting to tackle one of the main social issues of the day. Apart from the price of bread and transportation, I think housing costs are the next most likely item to drive people out on the streets in protest. Another factor that may soften the prices is the return of Syrian refugees in large numbers to their home country. To date, the number has not been significant, but that could change. If a large number begin to repatriate, this will certainly have an easing effect on rentals and hence will also spill over into sales figures.
Furthermore, a rather large decrease in foreign buying after the CBI move to 400K USD will hold a smaller, but still meaningful impact.
Again, another small but not insignificant impact will be from those who elect to voluntarily leave Istanbul due to the high costs of living (by Turkish standards). I do not have any figures on this, but certainly retirees in large part would be looking to re-locate from Istanbul, as well as people who can work remotely. Even within Istanbul, there are communities like that, who, for instance, live year round on the Princess Islands both for economic but also economic reasons. I believe also places like Izmir are benefitting from this trend. 20.000 lira a month is now starting to look like a very difficult amount to get by on in a month in Istanbul, but it is still enough to live pretty well in many other cities.
Also, now there is some evidence that the areas that really heated up in the past 12 to 18 months are giving ground to other areas. A great example of this might be Bomonti and Ferikoy. Areas like Bomonti, for the most part but not completely, seem to have topped out for the time being. This favors investment as areas like Ferikoy, just a few minutes stroll down the road, are often 40 to 50% cheaper. People do the math and come to the rational conclusion that perhaps they had better go for the lower priced neighborhood. Therefore, those neighborhoods become the new locust for gentrification. The cafes and restaurants that sprung up in Bomonti 5 years ago and in Bozkurt a few years ago, start opening up shop 500 meters down the road. Also, if buyers only have 2 or 3 million lira, there is no point in looking in Cihangir, Kadikoy, Galata, Besiktas, and most areas in Sisli. People also start to look in areas along the Golden Horn, that are both accessible to downtown and in the midst of a kind of regeneration. Of course, we are always trying to identify where these new pockets of value are. In years past, we caught on relatively early to what was happening in Bomonti then Mesrutiyet, then Kurtulus, after Ferikoy and Halide Edip and the Golden Horn. Looking for the next soon to be in place that has some pop in it for investors is always a goal of ours. Also, neighborhoods inexplicably go into decline, often overshooting the market at the bottom. These can be attractive, as the risk often seems to be removed when prices get to a certain level and perhaps the yields can start to make a compelling case for taking a new look at some of these areas. Much of Sisli was a great example of this 5 years ago. Prices took a beating from 2013 to 2017 and went, in my mind, much lower than they should have. Basically, 1K per sqm was ubiquitous and obviously, especially with hindsight, that was just too low for a city center Istanbul property.
One last note. Much of what we present in the whatsapp group is geared towards CBI buyers. I guess CBI buyers now make up less than 50% of our clients. The only issue is that if we start presenting non-CBI compliant properties, at least a full 50% of what can be seen online, clients need to understand that they will have to agree to write lower amounts on the title deed than what they actually pay for the property. In principle, this is not a huge issue and is very widespread here, but it does mean, in theory, that if the system changes and a move towards recording real sales figures is made, you likely would have to hold the property for 5 years. I have done it many times before and so has everyone I know who is in the real estate market here. But it is something to consider. In the end, it certainly opens up a lot more buying opportunities, which can be very tempting for many investors. As with everything in this rather asymmetrical market, investors should be aware of the pros and cons, of which I am pleased to walk you through.
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