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Keith’s weekly property news October 21-2021

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Keith’s weekly property news October 21-2021

My brief period of exhilaration and satisfaction at a job well done gave way to fret, discontent and worry mid-week as the Lira crashed past 9 and picked up pace meaningfully towards 10. That dark period of my life, say 2014-2018, when the house price increases in Lira could not match the depreciation versus the USD, left many of my clients underwater and not thirsty for much more investment. Yields got flattened, foreigners were leaving in droves. My Turkish clients shelved their investment plans and I was too Beyoglu-centric.

Bundled in political uncertainty, some headline grabbing terrorist spectacles and the botched coup attempt, I was left with a decimated client base. I even packed up shop and went to Budapest for a year. But Budapest is no Istanbul. So, I returned. I knew I had to stand my ground. Unfinished business.

With a tanking Lira, lots of political uncertainty again, slipping into a pessimistic frame of mins is pretty natural, but it does not get you out of bed in the mornings.

After doing a lot of soul searching this week, I decided that the best way to approach this was to look at the numbers and see if there was any teflon in the strategic approach I took in 2018, shifting a great deal of my focus to neighbourhoods such as Nişantaşi, Meşrutiyet (an old favourite), Kurtuluş, Merkez Mah, Bomonti, and more recently, far beyond. Was my theory holding water? If we bought at -10% on market, added value (10-15%) and took in good yields + property appreciation in our target neighbourhoods well in excess of the meek 3-5% I had conservatively been estimating- would we be afforded some measure of protection?

Could we at least mitigate the depreciation of the Lira? My gloomy ruminations gave way to a new resolve. So far, my fight to protect the money that had been entrusted to me has me up on the scorecards after a few rounds.

So far, the model holds up (no victory lap here, folks, as there are years ahead). A look at a few examples from 2021 only and assuming a baseline USD of 7.50-8.00. These are just representative cases, though naturally, I have put in a few headline grabbers.

1- Kurtulus 2 BR: purchase 650.000 lira reno cost 250.000 lira. 900.000 lira. Current market value: 1.4 mil Lira.

Outpaced the USD. USD gain.

2-Bomonti 1 BR. purchase 720.000 lira. Reno cost 160.000 lira. Current market value 975.000 lira. 6.5 % yield.

Underwater a bit.

3-Bomonti 2 bedroom. purchase 950.000 lira. reno 325.000 lira. Current market value: 1.9 mil Lira.

Easily outpaced USD. USD gain.

4-Mesrutiyet 2 bedroom. Purchase 800.000 lira. No renovation. Current market value. 1.1 mil lira. 6.75% yield.

Outpaced the USD. USD gain.

5- Merrutiyet. Home office. 1.8 mil Lira. No renovation. Current market value, 3 mil. Very high yield.

6- Kurtulus. 1 bedroom purchase cost 540.000 lira. Ron 170.000 lira. Current market value 890.000 lira. 6.75% yield.

Outpaced USD. USD gain.

7-Kurtulus 2 bedroom. Purchase 875.000 lira. No renovation. Current market value, 1.4 mil Lira.

Outpaced USD. USD gain.

These are not cherry picked and, apart from a few stand-outs, are fairly representative of the many properties we have sold in the past year. I suppose if the Lira depreciates another 25% in the next year, or week, I will start to get a little twitchy again. For now, I am trying to remain calm. There is a prestige factor in owning real estate in Istanbul, and if you are in it for the long haul, as I certainly hope you are, I believe many storms can be weathered. The partnerships and close working bonds I have formed with so many of my clients is a constant source of motivation, especially when the chips are down.

Deal-making was brutal this week. Negotiations were laborious and dragged on over days, with gaining traction a real chore. I was constantly on the phone trying to patch together deals that were hanging on by a thread due to the currency situation. Sellers were rightly apprehensive. Afraid to change to USD, afraid to keep in Lira; often stuck with low-paying tenant vis-a-vis the current rental market.  One thing is for sure; there is a palpable sense of crisis, but probably it hits the property market last. Turkish people, above all else, view real estate as the primary investment. Also, not with a rate cut, it should stimulate borrowing. I certainly do not see prices going down and I also see no evidence of bubbles forming. Actually, the outlook for real estate investment in parts of Istanbul looks quite favourable. On that positive note, let us shift to the real subject of interest;

Property links distributed during weekly zoom session

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My Bricks Istanbul is solely involved in the business of international real estate. My Bricks have over 13 years experience in negotiation, purchase, renovation, development of Istanbul property. My Bricks’s investment approach is opportunity-led as opposed to investment- led. When the property is fully researched and well sourced, only then will we suggest to clients.

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