Keith’s Weekly Property News June 19-2022
Last week marked the official end to the 250k CBI. Characteristically it was a sprint to the finish line as we literally closed deals with minutes if not seconds left on the clock. It marked the end of an era in a way, with the boatloads of clients. It was the best of times and the worst of times. In many ways, we knew it was too good to last so trying to adapt under those circumstances was tough. I intuitively felt it was just a matter of time before changes would be made to the program.
Therefore it was always a choice between trying to ramp up to meet unprecedented demand or accept the limitations of a small agency working within a fairly niche setting. In the end, I am glad we did not take on large amounts of staff and spend time training them in a highly idiosyncratic market where experience trumps training. In the end, we managed a hugely productive period over the past 18 months with renovations, sales and much more due to the perseverance of a few key people.
Of course with it came many growing pains and difficulties. Now is the time to set those straight and re-focus on the fundamentals.
The goals are pretty clear. We want to run the agency much as we have in the past, as a bespoke agency where we work hand in hand with the investor to reach their goals. And to sell property that we like. To do projects that we like. We will still, of course, be catering to 400K CBIs, but without the myopic approach we were forced into for the 250K CBI. We will be looking at each client and their individual need and assess it without any priorities or restrictions due to time lines. We will offer our best advice on which properties to buy and when, and will feel much less acutely the time demands of an outwardly imposed deadline.
Once again, our approach to property sourcing will be opportunity-led. This, in many ways, will give us some freedom back in how we engage with the market as a whole. One of the most frequent questions I have been receiving these days is, “Is now a good time to buy”? There is rarely a correct answer to this. With raging inflation and pressure on the currency, answers are more complicated. Nobody would have expected prices to increase in the past 6 months in USD terms, yet they surely have, almost across the board. The good thing is that we have a very well-calibrated understanding of pricing in Izmir and almost the entire city of Istanbul.
Our feeling is that if we are patient, we can always outperform the market, or perhaps less optimistically, at least buy at a fair market price. Our mantra is, but at 5-10% under market, add value where possible and maximize the investment through selecting good tenants, avoiding voids, doing smart or full renovations and buying in neighborhoods that we feel are trending upwards or gentrifying, benefitting from large infra-structural upgrades. Of course, this is a model that needs frequent re-calibration and tweaking. Does Cihangir still offer reasonable growth prospects? Although a lovely neighborhood, the consensus is that for the time being at least, the growth prospects and yields look to low to offer much to the incoming investor. The same may be said for much of Nisantasi and nearby areas. Tesvikiye went from being quite decent value to red hot and over-priced in a 12 month span. Besiktas, too, has almost become a wasteland for acquiring fairly priced properties. However, we still see enough fairly priced properties in many other areas, shoulder Bomonti, Kurtulus, Mesrutiyet, Merkez (Ingridstan). We have the luxury to pass on the over-priced properties. In fact, those do not even make it onto our daily or weekly lists.
At the moment, we seem to be looking at properties in decent, but not prime neighborhoods, at prices of around 1400-1500USD per sqm for unrenovated properties. It is definitely a jump up from where it was 2 years ago, but at that time I was marvelling at how cheap it was. For me it was fundamentally undervalued and I was calling it a screaming buy. Luckily, many people heeded that call and we got loads of good deals. New builds, without extra facilities start at 2500USD per sqm and in more luxury gated communities in areas like Kagithane, the new mark seems to be minimum 3750USD per sqm.
We still see lots of pockets of value. We even did deals in the late 250K CBI hours that were very good, despite the gruelling challenges of getting them to the finish line. So, for those looking to enter from now, my advice would be, “Be patient, then be super-fast”. If you see something good, jump on it. I saw something good yesterday and I am jumping on it. Often that means being prepared, with bank account open, POA in hand and sufficient funds for deposit.
The silver lining with an immediate 70-80% reduction in client in take is that we will be able to engage with clients in a much more 1 to 1 fashion, starting as early as this week. In addition, instead of feeling the burden to come up with 20 good options for properties in any given month, we will be pleased to have 8-10, a very doable number no matter where the market goes. Istanbul, as I have often said, is a huge, sprawling and chaotic mega-city, where the sands of real estate are often shifting. Our job is to keep in step with this fast-moving environment and to offer our clients the value plays that emerge. Our motivation to continue to do that remains unabated, whether it be in Izmir, Istanbul or elsewhere. We look forward to a calming in the market in the days ahead and want to be poised to take what it offers. In short, everything has changed…and nothing has changed.
We will also discuss possible CBI stacks for the 400K. Much of the 400K plus segment looks a bit frothy so we may want to consider 2-3 properties to reach that mark, which also brings budget properties back into focus, another benefit for investors with lower budgets. We think, however, that there is not much point returning to the ultra budgies and will probably keep the property search limited to 100K and above.
Now on to what really matters. Our preview of the properties ahead for this week. I have shared the links this week just to re-engage with everyone after a few postponed sessions.
Properties will be distributed in meeting. If you like, PM me and I will send them to you directly.
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