Keith’s Weekly Property News March 5-2023
Almost a month has passed since the unprecedented double earthquakes of 7.8 and 7.6 struck in several provinces in Turkey. The extent of the damage and loss of life is still being assessed, as are the plans to re-build and also to further earthquake proof many cities, including, of course, Istanbul. Every day, there are headlines about ambitious new plans to re-locate millions of citizens, create safe cities parallel to cities like Istanbul, demolish certain areas and much more. All I can say at this point is that we have to wait til things settle and we will have a clearer idea of how this will all play out. Definitely, we are in a wait and see period. However, some patterns will start to emerge and perhaps some new areas for investment will come to the fore. In tandem with our ongoing relief efforts (updates on that later), we will be monitoring the market to look for shifts in trends and look at cities that will be net benefactors from the massive transitions that will occur internally in Turkey for the years to come. One thing is for sure, and that is that we are in for a period of frenetic activity in the construction field, one way or another.
For CBI clients, we may want to consider that at least it is an increased possibility that there will be changes, too, to the CBI coming up in the months ahead. Although there has been no definite comments made on this, we are all aware that CBI programs world wide are subject to legislative changes. Turkey is of course no different. With this in mind, I have put together a game plan for those who want to get it done quickly and safely. It is actually quite a reproducible model. It involves buying one property in Istanbul and then drawing on secondary cities such as Bursa, Kocaeli, Izmir and others. We feel there is great value in some of these other cities and it is certainly easier to source properties. If clients are willing to give up on the “one shot” CBI dream property, this is an excellent way to go. In addition, it spreads out your risk, while allowing you to access markets that might actually outperform Istanbul in the coming years.
Although we have done a steady sprinkling of one shot CBIs, it became harder when the limit moved to 400K USD. For that mark, we really want something special, yet we are having a hard time finding it. When it was at 250 K USD we could pick up properties that were well located and were at least fair market price, even if they did not have all the bells and whistles. At 400K, we really want to see that, but we just are not. The model of multiple properties, spread out over a few different cities, will get you very decent yields, let us say 5-6% (while hoping for better), sqm prices with plenty of legs left for growth, Airbnb potential in some cases, and of course, access to a wider pool of properties from which we can select from. As a team, we actually have the capacity to close way more CBIs than we do, often getting bogged down by trying to fill the order in Istanbul and in neighborhoods of Istanbul where client prefers (and which are naturally harder to source due to more demand and the aspirational pricing of owners). I guess, to put it in a nutshell, if you want to get the CBI done safely, yet quickly, embrace our approach. Put your faith in us and you want have friends smirking at you that you over paid for CBI in Turkey just to get a passport.
Even though we keep reading headlines about rental increases, on the ground, with our rentals, we are encountering a fairly typical slowdown at this time of year. Compared to the Fall, when properties could rent in a matter of days, we are certainly seeing that move up to a matter of weeks. We will keep an eye on that.
Of course, at least for the short term. AIRBNB will be under some pressure, with reduced bookings. Some folks will probably cancel or delay their trips due to the earthquake news. Of course, this should not produce a long term threat to tourism, which will see its day back in the sun. It is hard to know how much this season will be affected. Again, I will be updating on this regularly.
Recently, we have been looking into additional earthquake insurance for properties. For everyone who owns a property in Turkey, it is mandatory to have the DASK insurance, which costs only 50 or 60USD a year. The payout in the event of damage in an earthquake only amounts to a few hundred thousand lira in most cases. While this is not enough to cover the re-build cost, it is possible to get additional “konut sigortasi” Our initial research leads us that approximately 750USD yearly would be enough to cover the full cost of re-build, though of course there would be some variance from property to property. If you consider the provisional rebuild cost number to be about 70K USD for a typical 2 bedroom flat, you can consider if it is worth if for you. You may want to keep in mind the Istanbul risk map, as well as the type of structure that you own or will own, to ascertain if it is worth it for you.
Finally, I just wanted to update on the relief effort that was spearheaded by group member, Alex Negrea. So far, we have delivered goods of all varities to earthquake survivors and have raised in excess of 25K USD. We are coming to the end of purchases and deliveries. Alsex will be updating us all on the whatsapp channel designated for that effort. Again, the most heartfelt thank you to those who contributed financially and otherwise.
And the preview properties. A little heavy on Halide Edip and Ferikoy this week, but that is where the value seems to be bringing us. (to be shown in meeting) our operations in the usual capacity.
Properties will be distributed in meeting. If you like, PM me and I will send them to you directly.
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