Negotiating and purchasing property in Istanbul

I just want to make a few notes here on subjects that frequently come up in discussions with clients. It may seem like basic information to people experienced with the Istanbul property market.

In essence, the process of buying a property for a foreigner in Istanbul is relatively straight-forward, though there area few areas that we should give special attention to.
So, after scouring the streets and having done all your homework, you have found a property that suits you. Normally, at this stage you would enter into negotiating the price of the property. As you know the market by now, you will have some idea of the value of the property. Turkey, like all countries, has norms for negotiating.

Buying a property is quite different from buying a rug in Sultanahmet, where prices can be  wildly overvalued and negotiations can start at 50% or less than the asking price . Professional real estate agents will usually not keep things on their books that are very overvalued, as it would only lead to a loss of their time and energy running around with clients. In my experience, you may be able to get 5-10% off the asking price and your estate agent will usually have a pretty good idea beforehand where the price could end up. Any property that is 20% higher priced than the market price should definitely be considered over-priced and should be avoided, and it is probably not even worth entering into negotiations as it is a sign that the seller is not realistic.

haggle till you drop in the bazaar

haggle till you drop in the bazaar

There are also properties which are very clearly priced to sell, and we should not expect wholesale discounts on those properties. Again, generally speaking, I find it useful to make the initial offer 10% under the asking price and see where that leads. The important thing as in any serious purchase is to negotiate in earnest. If you reach the magic number that is in your head, you in a sense should ‘feel’ committed, even if you are not yet legally or financially (InTurkey, you do not put down any money to enter into negotiations, though that, too, may change in the future).

Usually, I will ask the potential buyer what number they have in their head, and If I feel it is not realistic, I will dissuade them from making an offer that is too low as this will probably end in a waste of time.

Not as interested in your low offer as you may think..

Not as interested in your low offer as you may think..

Now, if your offer is accepted, it is quite normal for a small deposit to be paid quite quickly after that. For this deposit agreement (usually around 5% of total purchase price) you must outline the time frame and general conditions for the sale. In the case for foreigners, permissions must be obtained from the military, so we always put in a clause that the deposit is refundable if for whatever reason permissions are not granted (though I have never heard of such a case).

Get the wonga out

Get the wonga out

At this point, we suggest that the buyer contacts a lawyer and has the lawyer review the deed to check if it is ‘clean’ or free of any encumberances.
Once the permissions are received (anywhere from 4-8 weeks), both parties can proceed to the land registry to transfer the title deed, which only takes an hour.

Of course, there are many variations on the above information (such as purchasing off-plan, etc), but most clients fit into the above scenario.

If anybody would like to share their purchase experiences with me, feel free to drop me a line.

www.lilimont-istanbul-realestate.com 

The currency factor and Istanbul real estate… A carry trade?

The importance of currency levels will be a well-known point to many international real estate investors. And that attests to its importance.

The world goes round

The world goes round

When we use dollars, euros or the GBP to purchase a property in Istanbul, for example, what we are most likely implicitly hoping for is that the Turkish Lira strengthens against the currency used for purchase. Of course, at the time of purchase we would be hoping for a weak TL.

This is, in fact, what has occurred over the past year and a half. İn 2011 the TL was the worst performing emerging market currency, to firm slightly in 2012.  As it is still off 25% on historical averages against the USD, this represents a significant buying opportunity. As İ have said before, there is a giant For Sale sign on the garden of Turkish real estate, and Turkish assets more generally. This kind of opportunistic purchase could be viewed as a carry trade of sorts. İn the local press, there is an ongoing story about Mrs. Kobayashi, a stereotyped  Japanese housewife investor who has a fondness for buying Turkish Lira, which offers a high interest rate. Not too surprising, considering that Mrs. Kobayashi would receive pretty much zero percent if she left it in a Yen savings account. She converts that yen to Tl and gets a relatively handsome interest rate and prays also that the TL performs well against the Yen. İf that occurs, dear Mrs. Kobayashi will have done very nicely. Not without risks, but a popular currency move, nonetheless.

Mrs Kobayashi when she's not do the school run

Mrs Kobayashi when she’s not doing the school run

So, in the ideal Turkish property investment scenario, you buy when the Tl is weak, rent out your property for 5 years, after which period capital gains are exempt, the Tl strengthens and you get good capital growth through purchasing wisely. İn this scenario, it will be an excellent investment. Though, it should be noted that timing is crucial. Most analysts would agree that if you are fully committed to buying property in Turkey, now would be as good a time as any to convert your currency into TL to take advantage of a weak TL ( a strategic devaluation by the Turkish Central Bank to remain competitive for exports).

On a cautionary note predicting the falls and rises of the currency markets is fraught with difficulties that defy basic economic understanding. The property bought should have its own investment fundamentals as relying on positive currency movements as the sole reason for investment would be a game plan that even the best analysts have difficulty predicting. To highlight – It is worth noting that a little over 4 years ago eminent economists were scratching their heads trying to understand why the dollar was strengthening when the world was falling apart… it is now taken as granted that the greenback jumps when the markets drop as it’s seen as safety of the last resort. Not many of the great and the good predicted that!

However, Turkey may just possess one of the few property markets where you can achieve a 100 % percent investment return over a 5 year period.
İ believe all pretenders in Europe have long since abandoned such optimism. To put it in to risk context, buying real estate in Istanbul is a good strategic safe investment without the currency upturn as the economy is bouldering along well, however, add in a bit of positive currency tailwind and you could have yourself a eye-popping return without the need of leverage!

www.lilimont-istanbul-realestate.com