Keith’s Weekly Property News January 2-2022
Reflecting on the past year is a bit like reflecting on a lifetime. That is how much happened. The year started out with great hope, and the hope turned to full-on reality as the CBI program brought investors from every corner of the globe. As early on as March, it was obvious that this would not be just another year. Covid measures mostly dropped off, Turkey seemed to be kicking it into high gear and the property market seemed to be following. Prices had been beaten down for years and foreign interest was being meaningfully felt for the first time in a half decade. The market was mostly predictable, as were yields, capital growth projections and expectations. I felt buoyed by all of this and, in fact, quite bullish. Reasonable deals were aplenty and closing them was not a monumental task each time. Things were functioning smoothly. This lasted well through to late September.
But as from time to time happens in Turkey, a great blur descended on the property market; the currency crisis of 2021. Closing deals became nearly impossible. Even cash-hungry developers seemed reluctant to sell, or at least felt forced to increase their prices as the sceptre of hugely increasing costs must have been intimidating to say the least. All of their projections and calculations must have been discarded and projects newly started likely were delayed. The secondary market, often plagued by inefficiency due to the whims of individual sellers, became nothing less than a fiasco in November and December. We probably had a ratio of 10 broken deals to every 1 ending in success. The moving targets of CBI demands with evaluations and amounts needed to close out CBIs, made for even more diabolically unpredictable scenarios. In the end, a year that had been steaming forward, ended with a fizzle and a big question mark.
I am also slowly coming to terms with rising prices….everywhere. And I am starting to make adjustments to new realities, one of which is much higher lira pricing for property. There are many reasons for this; reduced loan rates, property in demand as inflation hedge and continued foreign interest (a much lower impact, albeit).
I believe when all this currency mess comes out in the wash, we will see a surge in TRY housing costs, but a slight fall in USD pricing. But as I have said many times, this will not be obvious until the dust settles and stability returns. I expect yields is where the bit hit will be felt, as local affordability will trump all other market forces. Real estate prices in mega-cities can soar, particularly if housing loans become more affordable, but these very same forces will also chip away at yields.
In light of that, we may want to put the yield play on the back burner for now and focus on properties that look to be good bets over, say, 5 years for appreciation. Keep in mind, there was a pretty steady decline in USD prices from about 2015 onwards right up til 2019. Istanbul had become absurdly cheap in some areas. It could become quite pricey in 5 years. That would mean a lot of appreciation. There is no certainty about this, but one thing is for sure, we are nowhere near a bubble. When everywhere else seems to be in a bubble of some sort or another, I am still a buyer here, under the right conditions. So for those who have patience and nerve to ride the roller coaster that is Turkey, the risk/reward profile might not be nearly as dire as you may have thought. It is an uncertain start to the New year, but we would do well to remind ourselves of the many advantages Turkey possesses.
Just to round those out:
1- young population.
3-tourism and important geographical position/hub.
4- Great destination for digital nomads and remote workers.
5- Regional powerhouse.
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