Keith’s Weekly Property News Fabruary 6-2-2022
It has been a slow start to February. The drought on the properties we like to buy continued. Of course, we are snapping up a few deals here and there, but I feel there has yet to emerge a pattern or a general “re-set” in the market post 2021 currency crisis. It still seems to be formulating itself. This makes for a prevailing caution in our approach. The currency seems to have stabilized, though that has been far from compelling, with constant fear-mongering that it is going to blow up at any time. There are also those on the margins predicting the Lira will suddenly surge in value. Potential peril on both sides there for buyers. Therefore, our approach remains largely the same: only going for what we feel fairly certain about.
The Izmir Blue project has been selling very well on the local market. If anyone wants to jump in on that it might be well to do so before unit quality/availability closes the door then. Again, panoramic sea views in excellent, gentrifying area 1 metro stop from core downtown in a premium, blue chip project are the selling points. Safe haven play for CBI, with an upside.
I often take pot shots at Property Turkey, but this week I decided to give them their due. They took on the subject of the somewhat paradoxically rising prices (even in USD terms) of the Turkish real estate market (read: mostly Istanbul) and they also acknowledged that it was hard to find property.
For the full video, which I encourage you to watch in conjunction with my notes below, click here:
Cameron and his sidekick always provide a few laughs and give a pretty rosy picture of the market. They are trying to sell properties en masse, so we do expect to receive news towards the upbeat end of the spectrum. That is not to say; however, that their analysis is wrong. I feel they often get it right. As I spent the past 6 weeks or so pulling out my hair as prices rose even in USD terms, watching their timely video actually helped me work through a few things. There are some reasons why prices are going up. Fundamental ones. And we would do well to acknowledge that. We really also do have to keep in mind that Istanbul is a major global city. Anyone who say, compares it to their hometown of Halifax, Bratislava, or Naples, will be missing the whole point. Certain types of real estate and certain prime areas in Istanbul can get Beijing type high sqm prices. That is just a fact. It pretty much always has been, or at least for as long as I have been here.
There are also pockets of deep value. If you want to go into an area highly sought after by elite Turks and buy the best property there, you should be comparing it to cities like Rome, Barcelona, Dublin or Prague, if not Hong Kong, London and Paris. There is a high concentration of multimillionaires in Istanbul, billionaires as well. Pretty much any wealthy Turk in the whole country or even one of the many millions who live abroad, own a property in the city of Istanbul, and usually only in a handful of neighborhoods: Moda, Etiler, Nisantasi, Bebek and so on. If you are expecting the price to be 2-3K for prime locations in those areas, you will get a rude awakening. Keep in mind there is limited supply and quite a bit of demand from very high net worth individuals. Add in a Bosphorous view and you might be adding a zero or two.
I guess my point is that, being a mega-city, Istanbul has all types of real estate and at all prices. I read a lot of comments lately on whatsapp and other places about when is the best time to buy. Nobody has that answer. Believe me. I like to keep it simple. As a frequent buyer of Istanbul real estate over the years, when do I buy? When I see something that makes sense to me. It really is that simple. I do not overcomplicate with macro-economic analysis, political events that may or may not happen, or the movements of the currency, all of which I have shallow knowledge. Everyone has their own method. Some people read hundreds of articles and buy nothing. Others keep searching til they find what they want. Some come for a holiday and check out a few places and others buy the first thing that they see.
Now back to the Property Turkey video. I will note the points where I feel they have got it right and also where maybe they fell short or I disagree with their examination of “Why are property prices going up in Turkey”.
I look forward to your opinions as well, so please do watch the video (though do not click “like” lol)
Cameron hammered it home….DEMAND. This is absolutely true. Turks have been locked out of the market due to high borrowing costs the past few years. Borrowing costs have been decreasing, yet are still very high. As long as they are going downwards, demand will continue to grow. There is real pent up demand. Fact.
In addition, many people are moving to real estate as a safe haven. More demand. While not very profound statements, they go a long way to explaining the apparent conundrum of rising USD prices in the real estate market.
Availability of land. They also got this entirely right. Obtaining buildable land, particularly in the city center, is very challenging and prices have pretty much always steadily risen.
Build costs have gone up. Another bulls eye. Iron, steel and some other product costs have increased dramatically.
Culture and mindset of young Turks is to buy real estate. Correct there.
Again I think Cameron gets it right when he demonstrates how Istanbul is still cheap compared to other global cities. Of course, much of this can be explained by the purchasing parity. Nonetheless, his argument was well-constructed.
Where I disagreed with Cameron or expected a bit more.
They acknowledge that their large team is having a hard time finding properties for clients. They talk about rising prices, yet neglect to mention that many would be sellers likely remain on the sidelines during this tumultuous time. This is an enormous factor. In my opinion, we are not likely to see restoration to a new norm until many sellers come back to the market. Right now, very few people want to sell. That also contributes to higher prices. They did not mention that at all, so a deduction there.
Cameron says there is no “right or wrong time” to get into the property market or real estate more generally. Well, I believe that is untrue. I always hear that old adage and each time I cringe.
I am sure the millions who lost the shirts off their backs during the subprime meltdown in the US in 2008 would disagree.
If you buy at the peak before a crash, you may never recover that loss or it may be a very, very long time.
Is that Istanbul? No way. People can barely get loans. But keep your eyes on the numbers. Some neighborhoods may be over-heated and though a crash may not be imminent, they could have peaked.
In all, I found this to be one of their better videos. We have to keep in mind they also tend to focus on up-market, new build properties, so no doubt that many of their latest projects, which are probably not much more than a hole in the ground, are the subject of fairly dramatic price increases. I have some anecdotal evidence that they are doing lay offs. No doubt. It will be interesting to see how it all plays out in the comings months. The only thing we can say for near certain is that there will be many surprises and twists in the plot. In my view, the biggest drivers in all of this, whether north or south, will be local demand. Keep an eye on borrowing costs locally. If these go down, you might get swept away if you are shorting the Istanbul property market.
Property Links to be provided in zoom session.