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Real estate investment in Turkey, particularly in Istanbul, is generally considered to be highly profitable, provided that the real estate investment portfolio is managed correctly and strategically.
While purchasing a single property at a low price and later selling it at a higher price can be a profitable investment, today we will discuss a real estate portfolio that ensures continuous and guaranteed profits in the long term.
Systematic Attack on Tourism and Real Estate Investment in Turkey
At the outset, before going into details, it is notable that these days (summer 2024), there is a systematic attack on Turkey as a whole, regarding both tourism and property ownership by foreigners. The majority view this as an urgent call to sell all their properties at any price and flee the country forever.
Meanwhile, a minority view it as a chance to buy at reduced prices for investments guaranteed to succeed in the very near future.
Calls to boycott Turkey have been heard many times before, and each time Turkey came up stronger with high income rates from tourism and foreign real estate investment.
We do not want to go through details about these boycott calls, as they are based on weak foundations and personal experiences that did not meet the expectations of the person recounting them, and they do not reflect the true situation.
Global inflation is everywhere, and since the Turkish lira is the currency of a developing country, it will certainly not be a strong currency in resisting inflation. You will see very high inflation rates on an annual basis compared to strong economies like the USA, the UK, or Gulf countries with dollar-pegged currencies. However, at the same time, salary increases and interest rates in Turkey are very high, which significantly compensates for the current high inflation problem for the local population.
The Impact of Inflation on the Local Population
Investors may ask, what is the relevance of understanding the local situation to an investor with foreign currency?
In fact, if the goal is tourism or living in Turkey, all claims regarding high inflation rates or the depreciation of the local currency are invalid because they do not affect either tourists or residents with foreign income. These comparisons are made based on the Turkish lira's value several years ago compared to its current value, without considering the significantly changed exchange rate. For example, the cost of a night's stay in a hotel five years ago was 1,000 Turkish lira, equivalent to 200 dollars, whereas today the same hotel costs 6,000 Turkish lira, equivalent to 180 dollars.
Therefore, any comparison regarding the Turkish lira without relating it to the exchange rate is not useful.
For foreign investors, understanding the local situation is extremely important because managing a real estate portfolio necessarily involves dealing with local residents, whether in renting out properties to them, reselling some properties to them, or buying from them.
Hence, if high inflation rates and the depreciation of the Turkish lira significantly affect local residents, this indeed requires attention and caution. However, as long as salary increases and overall income align with high inflation rates, there is no cause for concern.
What is a Real Estate Portfolio?
A real estate portfolio refers to a collection of properties that a foreign investor buys, sells, and rents out in Turkey. The term "portfolio" is very suitable for a dynamic market like Istanbul, which is rapidly growing and changing. This creates continually new and various investment opportunities in terms of budget, investment approach, and annual returns.
A real estate portfolio should include both liquidity and properties, with a preference given to one or the other depending on the real estate season and the efficiency of the available opportunities in the market.
For example, the best investment option this year might be to buy used properties and rent them out furnished annually. In another year, the option might be to purchase properties under construction and resell them upon completion without renting them. At another time, central properties might be preferred over cheaper properties in the suburbs, and the reverse might be true at another time. A real estate portfolio might include a diverse range of these options depending on the investor's situation and strategy.
We will discuss each season's investment potential in detail later.
Thus, the best return on real estate investment in Istanbul cannot be achieved by purchasing a single property, trying to rent it out to foreigners, and then, upon hearing some negative news, attempting to sell it at any price. This results in missing out on the actual profit expected from this investment if the property had been managed properly.
Real Estate Investment Seasons in Istanbul
We note here that we used the term Istanbul instead of Turkey because promising real estate investment opportunities are always found in Istanbul. It is the city with the largest population in an area a quarter the size of Ankara, with a population density 16 times greater than Ankara. Therefore, it is a highly lively and promising market at all times, only if the investor knows the best strategy to benefit from their investment.
*Pre-COVID-19 Season
At this time, properties were relatively cheap throughout Istanbul, and properties in the city center did not differ significantly in price per square meter from those further from the center. Hence, the optimal strategy then was to buy under-construction properties in the city center (and it was possible to obtain Turkish citizenship by purchasing a property worth only $250,000). Today, these properties have tripled in price and achieved rental yields exceeding 8% when calculated based on capital.
Purchasing during this period in areas such as Basin Express and Basaksehir was certainly not the best choice, as prices there were close to those in the city center and were relatively close to the suburbs of Istanbul, where prices were less than half per square meter and were arising areas with a good future at that time.
Of course, we are talking about real estate investment, not about those who owned property for residential purposes or vacations.
*COVID-19 Season
During the global lockdown from March 2020 to June 2020, despite being a short period, the discounts offered were indeed a once-in-a-lifetime opportunity, whether in real estate prices, stocks, or any type of investment.
The best move was undoubtedly to use all liquidity in the real estate portfolio to buy properties for a significant short-term profit.
*Post-COVID-19 Season
The period from June 2020 to June 2021 was a golden period for reaping profits from old investments (especially as Turkish citizenship was still available for only $250,000). There was a high demand for ready properties, particularly after the supply began to be reduced due to supply chain issues and the onset of global inflation.
During this phase, many investors, unfortunately, strengthened their investments without properly considering the future and without setting aside part of their liquidity to seize upcoming opportunities.
*2021-2022 Season
This period extended from mid-2021 to the end of 2022, during which the world began to hear about supply chain issues and the rising costs of shipping and construction materials, which surged wildly after the end of the global COVID-19 lockdown, faster than expected. Simultaneously, this period saw the United States print money excessively, more than $5 trillion, without real need, intentionally creating inflation problems that will continue until the end of 2025.
This period was very suitable for accumulating liquidity through selling properties with excellent profits. Also, under-construction projects were still cheaper compared to new projects that would be created later with extremely high construction material and shipping costs.
We assume that during this period, many resell offers were present to accumulate liquidity, as mentioned. Unfortunately, the market situation largely saw a rush to buy properties (reaching a point where it was difficult to find a new property for sale ready for occupancy!).
*2023-2024 Season
High interest rates globally and an urgent need for liquidity to seize opportunities in all types of investments, especially real estate in Istanbul, combined with the distortion wave mentioned at the beginning, means we can find discounts in the real estate market reaching up to 50%!
Certainly, those who did not seize the previous season to accumulate liquidity will struggle this season to take advantage of very unique opportunities. Worse, they will be affected by the overtly racial dialogue, which leads them to enter this season with a portfolio of properties only, without liquidity, and to attempt to sell their properties at the worst possible time, incurring significant losses. They will later blame Turkey and the Turkish people instead of taking responsibility and planning to start a new, correct investment.
Whether it's this type of investor who doesn’t know when to buy and sell, or even local investors who are tempted by high interest rates in Turkish banks and are doing everything they can to sell their properties to deposit money with a 50% annual interest rate on Turkish lira (at the time of writing this article), both groups have created investment opportunities not to be missed, with discounts reaching up to 50%!
These opportunities are limited and temporary until the interest rates are reduced (likely at the end of 2024).
If you want to seize these exclusive opportunities, just contact us.
We will also help you prepare a very successful real estate investment portfolio.
