We previously discussed in an article about how to sell my property in Turkey. Today, we will move on to talk about a more advanced topic in real estate investment, which is when should I sell my property in Turkey?
In the realm of real estate investment, it's known that purchasing a property at the right price during construction phases with unique specifications compared to neighboring properties and selling it later is one of the most profitable forms of real estate investment. If done correctly, it can yield an investment return at least three times higher than the rental return, especially when investing in ready-to-go properties.
Today, we'll delve into the appropriate timing for property sales. Based on our daily observations, we've noticed that even when an investor acquires a property with strong investment features, a competitive location, attractive pricing, and appealing advantages, they might decide to sell it at the wrong timing, leading to a significant drop in the anticipated investment return.
There are suitable times for buying and suitable times for selling. If you're one of those individuals who buy properties during the peak demand and attempt to sell them when demand diminishes, this article is directed at you, and you'll benefit from it.
The fear of missing out, abbreviated as FOMO, is a phenomenon not only defined in various investment markets but also in the real estate market. It signifies that investors' rush to a specific product causes its price to rise, attracting fearful investors who are afraid of missing out on the investment opportunity. They buy it at an elevated price, consequently missing out on the expected investment return.
Similarly, when investors start selling a particular product, it initiates a decline in its price. This compels other investors who own the same product to sell at a lower price, fearing further price reduction.
An investor falling victim to either of these scenarios, or both, ultimately leads them to transform what was supposed to be a profitable investment into a losing one.
We'll provide examples from the real estate market according to the past years:
Before 2018, the Turkish lira experienced a relatively modest decline against the US dollar. At that time, the price of a 3-bedroom and living room property in the Beylikdüzü area on the European side of Istanbul was approximately $250,000, which was equivalent to around 800,000 Turkish lira.
In late 2018, the Turkish lira sharply depreciated from 4.7 to 7 liras per dollar due to direct political issues with the United States. Since Turkey's real estate market is about 98% domestic, property pricing is primarily in Turkish lira.
This rapid depreciation was unprecedented, particularly since it was due to political reasons (the detention of the American pastor). However, it didn't affect local real estate pricing in Turkish lira. Consequently, the same 3-bedroom and living room property in Beylikdüzü maintained its price at 800,000 Turkish lira for a considerable period. This price became an irresistible offer for foreign investors, as the property's price in dollars was nearly half of what it was before, around $250,000.
It's worth mentioning that from early 2019 until mid-2021, real estate pricing in the Turkish market remained dependent on the Turkish lira. This meant that, for approximately two and a half years, foreign investors had an opportunity to purchase properties at almost half the value due to the strong currency exchange rate, alongside the citizenship incentive for buying properties worth $250,000 during that period. This period was referred to as the golden age of foreign investment in the Turkish real estate market.
However, after mid-2021, the effects of global inflation, driven by the printing of over 5 trillion dollars by the US government under the pretext of supporting the population during the COVID-19 pandemic, became evident and affected the world at large.
Due to an immensely substantial increase in construction and finishing material prices, property developers were compelled, for the first time, to price their properties in dollars instead of Turkish lira.
Consequently, the 3-bedroom and living room property in Beylikdüzü, which we previously discussed, now costs at least $300,000 due to the significant inflation on dollar-priced goods.
This signifies that anyone who purchased a property before 2018 (at the higher prices) and wanted to sell it during the period of reduced prices between 2019 and mid-2021 would undoubtedly receive a negative return on investment. This is because, as we've mentioned, real estate prices based on the dollar decreased by 50%. Consider a scenario where someone bought a property for $200,000 before 2018, and let's assume that its price increased by 25% after completion, making it worth $250,000. However, due to the depreciation, the property's value dropped to $125,000. Consequently, what was once a successful investment turned into a losing one due to choosing an inappropriate timing for selling.
Similarly, those who bought properties during the golden period of reduced prices and didn't sell before mid-2021 also mistimed their investments. The worldwide inflation led to economic downturns in markets. Even now, if the real value of your property is $250,000, due to reduced demand, you won't be able to sell it for more than $150,000. Again, this leads to a failed real estate investment.
So, what's the solution?
The solution starts with consulting a reputable company with genuine experience in the real estate market. They can provide you with accurate information backed by real practical experience and numbers.
Many diligent investors can study Istanbul's neighborhoods and comprehend real estate investment equations, thus evaluating investment opportunities relatively accurately. However, since they haven't experienced all these years firsthand, there remains a gap that cannot be bridged without the advice of a seasoned and professional real estate consultant.
Turkey's real estate market differs from that of your home country. Therefore, you can't measure it by the same standards. Even if you've owned properties in Istanbul before, it doesn't guarantee that your success in the next investment will be assured. The factors influencing real estate investment success are truly numerous and intertwined.
To the seasoned investors, in the midst of global inflation and recession, this is not the right time at all to sell your previous properties. It's the opportune time to increase and diversify your holdings. Alternatively, if you're not inclined to do so, wait for the economic recovery phase that follows a recession. Then, you can sell your properties at their true value without having to lose all or a portion of the gains you've made.
Remember to buy when demand is low because you'll achieve a higher return and sell when demand is high because property prices will be at their peak.
As the renowned investor Warren Buffett famously said:
"Be fearful when others are greedy and greedy when others are fearful."
This means to buy when everyone else is scared and to sell when everyone else is buying.