Keith’s Weekly Property News May 14-2023
It is election day in Turkey and the tension is palpable. As I generally use these zoom notes for the purpose of updating clients on all matters real estate in Turkey, I will refrain from making much comment or offering any predictions.
Let us limit the scope of the commentary to possible outcomes for the property market. CBI speculation is always one of my least favorite topics because, ultimately, it is indeed just speculation. However, as I have pretty regularly maintained, the CBI almost certainly is approaching the end of its shelf life, whether it be a matter of months, a year, or more. I would be quite surprised if it existed in its current form by the end of 2023, regardless of which party is at the helm. As for the property market in general, I feel it will not have much of an impact either way, except is particular areas and particular developments which were more favored by or over-hyped to foreigners. The main drivers of the market will be manifold, with CBI occupying a small slice. People looking to get on the property ladder to escape high rents is always a huge driver. Turks, still in shock over recent inflation, looking to hedge against that, of course, always see property as a potential safeguard against that. Demand for newer properties post-earthquake is also a factor. But local affordability and the economics of re-building may force many buyers to buy older properties due to the significant price gap between the two. People living in high risk areas, both as tenants and owners, are and will be looking to upgrade to safety. And for the rest, we probably have to wait til the election outcome is decided, either by tomorrow or by the run-off round within 2 weeks. Then much clarity should be added to the market. Either way, again, I do not see much impact on pricing. It is quite hard to see prices going down from this point onwards, barring an unforeseen, very negative large impact event.
Airbnb continues to look patchy. We still need to see numbers from May tourism, but there is no doubt we are in a slump compared to last year. This is clearly due to the earthquake. How long it will take to rebound is anyone’s guess, but I think it will not be protracted, and should be a V-shaped recovery. In the end, it might chip off a percentage point or two on the returns, so if you were at 10% last year, you might find yourself at 8%, if you were at 7%, you may dip down to 5%. Again, my view is this is nowhere near panic territory as the returns are still attractive. However, if the property is really under-performing through June and July (say, under 50% occupancy), you may want to consider moving to other rental models.
In addition, you should never take it for granted. I have a few contacts in some of the other companies who manage Airbnbs and according to them, there have been issues in some cases with the neighbors interfering with the smooth running of operations. Keep in mind, this kind of “grey” area, not to mention legislative murkiness and proneness to legislative change, is seen in Airbnbs in countless cities around the world. Again, not much to lose sleep over, rather just something to keep in mind. Im always a fan of cooling people down when they come in all guns blazing with Airbnb plans. When calculating ROI always use long-term, unfurnished as your base number. The rest is attainable gravy, but gravy nonetheless. Sometimes you have to timidly ask, “More soup?” and not automatically assume it is birth right.
Yields seem to be holding their own these days, so that is good news. Look for anywhere from 3-5% on newer properties and a bit less on new build projects. Expect more on older properties, in the 6-7% range. Be careful on new projects. The yields there can be quite low, but the argument is that it is value store. That may be the case…in some cases. If it is a luxury project, try to get minimum 3%, 4% would be quite good. 5% and you have knocked it out of the park, my friend. If you are getting 2.5% or less, there is likely an over-pay in there somewhere. On a more economy-minded new project, bump those yields up about 1%. And never accept sales guy at face value. If he says you can get 2K USD for a 3 bedroom apartment in Beylikduzu looking “towards” some random blue sliver, which may or may not be the Golden Horn or the Bosphorus, it is pure fiction. Do your research. It is pretty easy to plug in some filters and get comps on local web sites (cancel the highest ones, which are outliers, and no reflection of market reality). Or ask me or one of the team. I fell for that trap many years ago. Guy told me it would rent for 1K euro. Great, methinks, even if I get 500 Euro, it is fine for me. Deal done. I ended up getting 250 Euro. And that was from a “buddy”. To compound my misery, I took out a Swiss Franc loan to finance this ill-conceived sally into “faith-based buying”. It was 2008 and maybe some of you know what happened with the Swissie. I eventually sold the property, but it was probably the only truly bad real estate investment I made. I imagine if I could fall for that, what others have fallen for (well, actually, I know very well, no need to imagine). Research. Get stingy on the details, as well. That is where the devil lies, after all.
OK, folks, always much more to say, but it is election day and we are really following it. Plus we have to search for lots of properties for lots of clients. Be good! Hope to see you in the session tonight.
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