Keith’s weekly property news November 14-2021
Even compared to challenges in the past weeks, this week was hands-down the most arduous week for sourcing properties in the secondary market. Every single factor seemed to lean towards a poor deal making environment; super slow execution of valuation reports, the USD cracked the psychological barrier of 10, generally higher prices, sellers who either turned out not wanting to sell or to sell very reluctantly, and the inefficiency of some of the agencies we by necessity have to work with to find additional properties.
We had lots of last-minute calculations, were taken to locations very far from what pin maps indicated, and taken to properties that hardly resembled the photos. In one instance, we were even taken to a nursing home, only to have one of us allowed entrance due to health risk. Obviously that property was not going to work out for us as I would not even want to touch negotiating the termination of the rental agreement. That episode had me thinking it was just not going to be our week.
In addition, I suspect that many would-be sellers held off on putting their properties on the market in such an uncertain market. The property market, I have always maintained, functions more smoothly and efficiently when the environment is stable and people are able to have some visibility on large financial decisions and transactions. We are clearly not experiencing that at the moment. Therefore, I expect sourcing of properties on the secondary market to remain challenging during these volatile days when inflation is rearing its ugly head and currency depreciation has been extreme.
For CBI buyers who want multiple properties on the secondary market, all of the above can slow down the process of finding 2-3 quality properties. Therefore, a bit more insistently, we are encouraging our clients to consider the 1+1 model; one property on the secondary market and one from a new build project. With that in mind, I have over a dozen visits to new build projects planned for this week alone. I hope to have 2 viable alternatives by the end of the week. We already have one, but the unit size and entry price may be high for some investors, so we want to also offer one where there are a decent selection of studio or 1 bedroom properties at lower entry level prices. Our standards of what we expect are quite high; we need properties that value well, that are not very far from the city centre or at least part of a new emerging city centre, offer prices where there is some expectation of growth, and where yield expectations are at least moderate. I do not think we will be so lucky as last time, where we managed to do a bulk purchase with USD backed rental guarantees. However, I think we will have some attractive units to propose.
Of course, if clients have a strong preference for the secondary market, we are trying to accommodate that. It is, after all, our signature play. Yet, given the USD/Try dynamic and rising prices/reduced stock on the secondary market, we would also do well by trying to get the best of what the new build market has to offer. This video Ladislas, The Wandering Investor, yet to be made live, sums up my thoughts on the subject.
Now, to end on a very positive note. The valuation system is changing back to the old system, effective tomorrow. Why is this such good news? The new system was beleaguered with inconsistencies and was painfully slow. That slowness led to broken deals especially when currency shifts of 10% plus were occurring in the time between ordering the valuations and receiving them. Also, in that system, the process was entirely out of our hands. Now, we are back in the driver’s seat and can get the reports lightning fast, once again. Also, we can have a dialogue with our chosen appraiser. In the case of the gentleman I work with, if something comes in lower than I expect, I simply pick up the phone and request the rationale behind the discrepancy.
In almost all cases, we end of seeing eye to eye, as this individual knows our particular neighbourhood very well and is attuned to real market prices. In the centralised system that they experimented, I heard stories of appraisers from Ankara giving very low valuations. The real estate prices in Ankara are quite low, so it is not that surprising. In the end, the main issues were the clunkiness of the system; we could not get reports issued or they were rejected because the owner of the property owed a few dollars to the municipality, or they could not work out how to even pay for the report and we were sometimes only notifies a few days or week later. Some owners just got frustrated and said they would prefer to sell to a local than go through the headache. Now, all that is changed again. We will have reports issued mostly within 48 hours.
And now a peak at next week’s hopefuls.
Property links to be distributed during zoom session.