Keith’s weekly property news December 8-2024
Overall market. Thin trading and a few “easy pickings”
To just touch very lightly on market conditions, there doesn’t appear to be any significant change from the trajectory of the past 16-18 months. In short, downward pressure on prices, with some weak signals of a bottoming in the market. All in all, borrowing rates are nowhere near where they need to be to form a robust rebound. There is not really even much point in getting into the technicals of supply and demand when the monthly payments on 5 and 10 year mortgages are well beyond the reach of aspiring buyers. No need to even mention mortgage periods of more than 10 years, as it is unheard of in Turkey. So, to sum up, it is essentially a cash market and there are only so many cash buyers. Some relief is provided by developer-backed financing with installment payment options. Probably some of these deals are starting to make more sense, but it is not something open for the most part to foreign buyers, though not completely closed either ( a subject too broad to delve into in these short notes).
The graphic below shows the monthly payments on a 10 year mortgage on a mere 3 million lira loan (about 90 K USD). As we see, the monthly payments are a whopping 95.000 lira!!! About double the salary of a teacher and probably more than what many white collar workers make. What you pay back on that 3 million lira over 10 years is 11.485 million lira. If the lira actually stabilizes or even strengthens, you well and truly will be saying, “ayva yedik” (entered a bad situation)
Now that we have poured enough cold water on the market, it is critical to recognize that when rates do come down, there will be a huge surge in demand. This might be the last ship sailing for ‘would be’ home buyers who are at the bottom/budget end of the market. The higher end properties will firm up in price rather than see a surge from a drop in rates, but those at the lower end seemed destined to get a healthy bump up. Take a place that is 150K USD now. Assume it is livable, without any major negatives; reasonably central.
As monthly payments go down, the affordability index for those buyers will go up and these properties have the best chance of seeing a 20-30% increase in prices. This would not happen overnight, but expect that 150K USD place – without any major flaws, reasonably central, livable – to surge in price to something in the 200K range. As these properties typically yield pretty well already, snapping up as many of these as possible seems like the best play in this market. And the sweet part of the deal is that the downside risk is well and truly mitigated. At regular intervals, certain “categories” of properties get closed out; like squares on a Jeopardy game board. Many years ago, it was the Bosphorous view property for 300K, then it was a decent historical flat for 200K in Beyoglu or a lovely sea view flat in Izmir for 125K, or a cheap “fixer upper” for 100K in Kurtulus. Once closed out, they do not come back and it looks as if this class of property (budget) will go that way. That 150K figure is more of an Istanbul based context here, but the same can be said for several major cities, perhaps only with the $ figures lower. The overall % return should more or less track across those cities, with 1 or 2 shining and outperforming for one reason or another (demographic trends, major infrastructural improvements, a lively affordability dynamic).
So, while not the dramatic knockout punch, these jabs into the market constitute a “take the easy yards” approach (dreadful mixed sporting metaphor..ahhh). They can also be a great way to build up an income generating portfolio ‘on the cheap’. Those little gains add up, and these ‘little engines that could’ might even offer you some peace of mınd as safe haven assets, allowing you to swing more wildly and heroically into the wee hours of crypto nights ( ;
Although far less reproducible and much more labour intensive, scouring for a deal at the upper end of the market during times like these can be interesting. That takes a fair bit of patience, some skill, and some luck. If you are in the mood for that, and have some time, let your realtor know and some kind of alerts can be set up that might turn up something there.
Rental market. Long term and short term:
Very briefly here to avoid repetition from the past. Rental market functioning normally. There has been a definite increase during the past year, but a plateau should be reached soon. Many of the imbalances of the past due to lira depreciation are getting ironed out over time. At least for the time being, there is more predictability and, dare it be said, visibility.
Airbnb remains a gordian knot, often exasperating to keep up with. The ‘hands off’ approach until all the dust settles seems like the best path. There is still too much ambiguity to warrant laying any big bets in that direction. Having said that, if you have a clear shot on an unambiguous Airbnb property, go for it. That will likely be in the ‘outperform’ category, assuming you are buying in at a reasonable price and not some “Yeehawwww, its got an Airbnb licence” price.
Tourism, tourism, tourism:
While it may come as no surprise that Istanbul is one of the most visited cities in the world -with its amazing connectivity, history, culture and natural beauty – very few would know that Antalya is also in the top 10 in the world. Turkey is the only country with two locations in the top 10 on arrivals. Antalya airport feeds a large swathe of coastal areas, bringing in massive tourism revenues. Istanbul is the gateway to many other destinations within Turkey including Izmir, the Black Sea, Kapadokya (Cappadocia) and more. Yearly increases in tourism have been the one constant during the past 20 years. There is no immediate sign on the horizon that this will change.
And to end on a positive note, the renewed hope, albeit cautious, for peaceful change in Syria, may also lead to positive change for Turkey.
“Yurtta sulh, cihan da sulh” – peace in the home land, peace in the world”. Indeed.
Properties will be distributed in meeting…
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