Keith’s Weekly Property News May 26-2024

First of all, happy 19th birthday to my daughter Ruzgar!!! It has been so great to have her back for the summer from her basketball adventures in university in the States. The bribe was a bit heavier than “ice cream” money for her to allow me to host my zoom tonight! Guess that happens when a gal turns 19.
Again, for my regular followers I do apologize for the repetitiveness of the notes. However, we have a pretty steady flow of newcomers and I find it necessary to repeat a lot of the basics. In any event, I suppose the brief market updates are of some use to everybody and, no doubt, the veterans skim over it quickly, kind of like watching YouTube at 2X. By their very nature, these are rarely in-depth analyses but more of a snap shot of much of what is going on in the market, though I often do try to tackle both larger and more granular issues including the rational of sqm pricing, benefits of doing short term VS long term, how to maximize your investment and so on. A bit later, I will talk about what is considered to be an ideal apartment size for investment in Istanbul and Turkey more broadly, a question that comes up surprisingly often.

General market:

Not much has changed since the last zoom session a month ago. The local market remains moribund, with high borrowing rates prohibiting any kind of reversal in the downward slide. There still is not much visibility on when a turnaround will occur, but a rather sharp reduction of real estate activity has been going on for over a year now. When all is said and done, probably the market is down 15% off its highs.
As a foreign buyer, it is a fairly decent time to search for property. As always, the areas we prefer are Istanbul, Kocaeli, and Izmir, with a further nod to places like Mersin and Bursa (we currently do not cover). Again, rather than trying to be a maestro in regards to timing the bottom of the market, getting in at various points can work just fine. Doing some research, combined with a common sense approach that takes the market for what it is and being realistic in terms of what it might offer is often much more important than trying to time a rock bottom. Reasonable deals do not just crop up at market bottom. The best deals come up quite randomly, I can say from experience. Also, being realistic is key, not to discourage anyone. The market is very intricate and spotting good deals takes expertise, luck, dedication in following the market. The past 2 to 3 real estate purchases I made were nothing extraordinary at all. But they served some purpose for me, for an extent of time. Would I say they were the best investments, or even best RE deals I have ever made? Certainly not. But there was something I liked about them and they had some utility for me. As I have said many times, finding your dream home in Istanbul is a really tough pursuit. Izmir and Kocaeli have oodles of quality and lovely property at very competitive prices. Istanbul often makes sense more on a value store, safety asset angle. Appreciation will likely be better in secondary cities. But if you want pizzaz, well then, Istanbul has that any day over other cities in Turkey, if not the world.
So, what can the Turkish property market offer to the investor at this time? Let us take a peak at yields and rental market to get a few insights what those trends might reveal to us.

Long term rentals:

There was a stagnation probably from Fall til early Spring. Properties seemed to be taking longer to rent out than usual and the numbers were a bit off what I would expect. For the most part, that trend seems to have been broken. Yields are back up, and guess what?? It is both the result of a stabilized lira (audible gasp from the crowd lol) AND decrease in prices of RE. Luxury properties, often a safe haven, remain in the 3% range. However, the others mostly seem to be in the 5 to 6.5% range and probably an uptick of a % point compared to late 2023. Quite decent.
Still likely there are some lingering affects of many EX-Airbnbs hitting the rental market – especially in downtown Istanbul. More on that a bit later.
Suffice it to say, rarely do we ever see a problem with rental demand in major Turkish cities. Unless your pricing is a bit out of whack with current market conditions, you should be getting plenty of calls. Of course, our policy of notarized eviction letters – adopted after big lira depreciation days – does add a bit to void %, but not so much.

Short term:

As of June 1st, no short term operators will be able to advertise on Airnbnb and booking.com
This will be addressed fully post-June 1 when we have the full picture. We continue to monitor closely. Those who are able to manage to get an Airbnb licence – providing they have a decent product – will do well on short terms rentals, with numbers like 10% yield certainly a possibility.
This brings us to the next and final subject…what is the ideal size of property for investment in Turkey?
This, of course, is an impossibly vague starting point. First of all, let us point out the obvious and say that if it is for lifestyle, it is purely a matter of personal preference and may take into account a host of factors: how often you will actually use it in the year, presence of little bairns or not, and so on. Generally, I am not hugely in favor of lifestyle investments unless you really are committed to sustained and meaningful chunks of time living in that property. Taking the ‘me’ out of the question often helps when being able to execute an investment decision in what is, after all, a foreign land,
So, having said all that, I can tell you that Europeans tend to obsess over this question much more than do Turkish investors.
Turks would mostly scoff at buying anything less than a 2 or 3 bedroom (‘Where will Mom stay when she comes to take care of our new born’?) However, affordability is often changing those intra-family discussions and like everywhere in the world, compromises are often being made.
Another point is that there is some compression on prices. Often, the larger properties will have cheaper SQM price.
In the end, when you put it all together, Istanbul, in particular, is quite different from Paris and Prague, where the studio apartment reigns supreme.
Also, for short term in Turkey, large properties often do exceedingly well due to larger families coming from the ME, Iran and the “Stans”. Not to mention lots of other places.

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