Keith’s Weekly Property News June 11-2023
2023 has been a fairly choppy ride even by the standards of Turkish real estate, which is always somewhat of a ride. We started with typical seasonal slowness in winter, followed by the great tragedy of February 6th when it seemed everything changed overnight, in the middle of the night. A long period of national grief followed. Then there were the elections, which seemed to drag on forever. Finally, post-election we have been hit with a currency devaluation. And we are barely half way through the year. Each of these events kind of put a pause on our operations, as we were often left wondering about the outcomes. The latest currency crisis has, once again, forced us to slam on the brakes and wait for some visibility in how it will impact the greater market. It can have an affect on pricing, as well as the rental market and beyond, so getting it wrong comes at a price, both for us as well as our clients. At the moment, I feel we are fumbling in the dark a bit. Is there worse to come? Where will the lira stabilize? What will be the impact on inflation. In the fall of 2021 the lira went from roughly 8 or 9 up to as high as around 17 lira to the USD. Prices shot up in lira of course, but even in dollar terms. Rents skyrocketed to match. Will the same occur this time? My initial reaction is that it depends on the extent of the devaluation. If there is a lot more to come, I feel the prices both on rentals and on sales cannot keep chasing the USD up.
But that is exactly why we have to wait and see.
There are other reasons why it is unproductive to hunt properties en masse at this time. Many of the sellers may either revise their prices for what are currently listed, or more likely, lose their appetite to sell altogether. For people doing the CBI, it is an even greater balancing act because in the time between when you pay your deposit and when closing occurs, the math on your CBI purchase could have changed dramatically. These can be frustrating events for all parties. Of course, where possible, in this environment, we generally try to set the price in USD at the time of signing a deposit agreement. There does not seem to be a better solution.
Will we see some clarity on June 22, the date of the next Central Bank meeting? Or perhaps before? In any event, we are monitoring it closely and doing our best to advise clients on a course of action, whether it be on their rentals or on their purchase plans.
At this point, I do not see anything that will fundamentally impact sales prices. Nor do I see much to negatively impact prices. Most likely the number of transactions will remain low, as has been the pattern for the past several months. If matters can sort themselves out or stabilize, I would expect a significant uptick in sales activity in September, a traditionally busy part of the year, when perhaps the pent up demand of several months will again assert itself.
At the moment, to be frank, I do not see a silver lining in the depreciation. It undoubtedly will be reflected in softer yield numbers, which is a pity. I will go over a few possible strategies for dealing with this in the zoom session.
Having said all this, I am still an active consumer in this market and do not see much reason for others not to be. Definitely the buying opportunities are there, though admittedly, selectively.
Airbnb seems “stable to picking up” slightly, but not red-hot as in past years. I believe some of the larger, flashier real estate companies are over-marketing projects that are “Airbnb” friendly, but certainly not in strong Airbnb locations. It looks like they will flood the market with these relatively bland offerings , which will perform very poorly, but will nonetheless take a bit of cream off the top of the much better Airbnbs just due to their numbers. Eventually, I suppose those will die out when owners realize they do not get the bookings that were promised.
Here is an example which we will briefly deconstruct in the zoom session. The numbers in my view are egregiously optimistic, loose and imprecise.
Could they happen? Yes, in the best of all possible worlds. But I would give the likelihood of that occurring less than 1% But the numbers are so opaque it is hard to even argue against them. I would be opaque, too, if I were throwing up Hail Mary numbers.
The upside of Airbnb that perhaps offsets any drop in occupancy would be that earnings are linked to hard currency. About half the properties we sell are probably not suitable for Airbnb. That is fine. They were purchased for other reasons (better appreciation prospects, gentrifying neighborhood, etc). And we even have some that are perfect Airbnbs, but the building management or neighbors are against it. One has to weigh all of this up.
As for our properties this week, we are slowing it down a bit and only filtering properties from the last 7 days, as we feel there will be a lag til we get updated properties on the market. Nevertheless, we would be amiss to let a good crisis go to waste, so we will pick through the offerings and see if we can find a few gems. If not, we will settle for some tough, all-weather properties.
Properties will be distributed in meeting. If you like, PM me and I will send them to you directly.
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