Keith’s Weekly Property News Fabruary 13-2-2022
Heading into the middle of February, we have had a patch of Spring-like weather and quite a number of clients passing through. That is always a challenge as we try to accommodate the often very different needs and expectations, not to mention timelines and restrictions of every variety for viewings. This week, we felt that in a very pronounced way.
But hey, the Lira seems to be holding steady, almost eerily stable after such a period of volatility. As I have said many times before, this is crucial for us to be able to make deals. We need stability to be able to pinpoint value, estimate yields, and much more. Let us hope for a continuation there.
We are making steady progress, on the property management front. As I have pledged before, we will keep running multiple sessions on Thursdays until I feel we get it right. As there are so many issues to be resolved, I still feel we are about a month out from where I will feel satisfied. Selin, myself and Fatih will be holding a 2 day session to work out remaining issues this week. This is vitally important to me and we are committed to getting it right. We can only survive on the triage approach for so long. I cannot over-state how much of a challenge it is dealing with renovations, different building managers, utilities connection without proper POAs, neighbors etc. on a large scale. Somehow…still…every darn neighbor in town ends up with my number and the rich variety of strange complaints and requests that pop up on my whatsapp are pretty staggering.
As always, we are operating in an ever-changing landscape and we need to act fast to catch deals as well as see&evaluate new opportunities. Unfortunately, the Izmir Blue project that I had been promoting has practically sold out before we could really even capitalize on it. They have also increased the prices on remaining units due to what they say has been overwhelming demand. I do not doubt it in this case. Pity it had not come on my radar 3 months back.
If I had any doubts that there has been a surge in demand locally, those have now been put to rest. I put a non CBI compliant property (owned by my foreign client) on the market last week. I had to take down the listing and re-think after I got 10 calls in one day. I did what I hate people doing to me….I raised the price. The first actual viewer made an offer and we are now about to close. It is going for 15% more than I thought it should have. We might have been able to get more, so I even wondered if I had done right by my client. We went ahead, as he let me know there was a bit of a rush. I have another such property that I will put up for the local market only next week, so I am pretty curious how that will go. As most of my clients who have already bought are likely not considering selling for years to come, this may not be that interesting. For me, it is quite fascinating.
What might be of more interest for those who have bought and for incoming clients is the state of the rental market and particularly how yields are holding up. Yields have been a bit of a dirty word for me since the currency crash occurred, but they cannot be ignored for long so I will dive in with some real-life and fresh examples. Some of the numbers are slightly rounded for ease.
2 data bits for you from current rentals done last week.
Property purchased in Summer for 800 K TRY (USD was around 8). Complete reno for around 25K USD, 80-85 sqm, 2 bedroom apartment. 125K USD all in.
When I did my rental estimate, I expected around 5000-6000 lira monthly. We signed on for 8000 lira monthly. What can we extrapolate from this? Indeed, the client may have taken a hit on the yield, but nowhere near as bad as I would have thought. USD appreciation took out some of the yield pop, but not as much as I had feared. Still, we need to worry about where the Lira goes from here, so I am by no means taking a victory lap.
Another take away from this? Well-renovated properties are in short supply. I am sure demand for rentals in new build projects is also very high for those coming online.
I believe the above will be fairly representative for properties bought during the most part of 2021 and newly entering the rental market. Of course, with some regret, there were some rentals signed pre-currency crash where, retrospectively, we had rented out at too low a rate. But that is purely with perfect hindsight.
New build property purchased in October for 185K USD, approx 1.85 million TRY at the time. Old tenant vacated at the start of February. New lease signed at 9400 TRY, or just over 700 USD. This yield is fairly typical, better even, than yields for most new builds and not at all bad in light of the ensuing currency shifts.
We will have several more rentals coming up soon, so we will certainly be suggesting starting out at higher prices and being a bit more patient. In any event, the rentals will go very fast unless we have grossly over-done it on the ask. Also, I am getting a better feel for the yields now that the dust is settling again -squirm in my chair lol- so I suppose we may again be able to discuss yield projections.
The big question mark in the surge in demand for rentals is why is it happening. Does anyone have any idea on that? I think Covid just drove up the rents and then they kind of just seemed to keep going. They are still quite cheap by European standards, but they must be getting very painful for many Turks. In situ tenants, as a result, are hunkering down. We used to be able to incentivize them to leave on purchase by offering a few free months of rent. No more. That is a whole other story.
Istanbul Airport, despite its many detractors, is the busiest airport in all of Europe, proving that the relative openness of Turkey during Covid has made it a top destination. I can only imagine how tourism will look this year if the same trend continues. It will be an absolutely massive year, Even at this time of year, the city seems to be bursting with tourists. You might want to book your Airbnbs early.
Speaking of Airbnbs, we will be holding a workshop in about 2 weeks for everyone who wants to go that route. We will give some idea of nightly rates, our fees for management, and much more. We will have a new staff member who is completely dedicated to the project.
Property links to be shared in zoom session.