Have a great day everyone!
Glad to see you on the pages of my expert channel about foreign property.
Since February 2023 Turkey has been on the path of a major correction in the property market, which is developing according to academically predictable laws.
As a rule, at first, when demand decreases, prices do not move for quite a long time, at least half a year sellers and developers assess the situation, but what if it is a temporary period. The logic is generally correct, the property market does not like impulsive and ill-considered decisions.
Starting from autumn, prices on the secondary property market began to fall. Especially exposed to emotions of course were foreigners, they have somewhere to spend money unlike the owners of flats - native Turks. And the point of entry for many was in the past quite comfortable. For example, in Antalya in 2020 someone bought flats for 70-80 thousand dollars, and during the correction they could quite quickly conclude a deal at a price of 120,000.
In the secondary property market, the apogee of emotional sales and the lowest prices were at the end of winter. This is the deafest, so-called low season in Antalya, as well as in many holiday destinations. It is understandable, as the reason lies in the absence of buyers, who do not see the point of coming to the resort city in winter, especially after the past New Year holidays. It is also worth recalling that most buyers of foreign property by definition people with a high level of wealth and mostly entrepreneurs. Of course after January, February and March are some of the busiest months of the year, at least that's how it was for me when I was running my company.
At the same time, the developers kept their prices firmly in place throughout this period, watching with a dejected face the difference between similar flats on the secondary market and pevichka reaching 35-40%. But many people had a safety margin, and in general it was not small after the fat emotional 2022, so no one was in a hurry to rewrite prices. And the cost of construction has risen a lot lately: four reasons
All new complexes are built of higher quality materials, more modern in comparison with their counterparts built 5-10 years ago. The government has steeply taken on the developers, introducing a large-scale reform of the construction industry and a total system of control of all stages. And all this naturally in the cost of square metres.
That's why property developers have such gloomy faces. And now the main insider, which not many people know about. In Russia, the developer is a landowner, developer and contractor. With few exceptions.
In Turkey, the entire property market belongs to landowners who form the pricing rules for builders. And as a rule they are as follows - during construction 50% of the built flats at a certain price goes to the owner of the land, the rest is taken by the developer and some small part of the contractors as barter. And all this is within the framework of the concluded contract, which is not retroactive if there is no agreement between the parties. And this was the reason why developers were slow to change pricing, they were simply not allowed to do so.
Chronology of events
So, spring has passed, in the epicentre of which there were the most chocolate prices for buying secondary market flats and the tourist season has started. It got warmer. The buyers' market began to recede into the past and again the sellers rose up, dashingly rewriting prices for flats that were not sold in the low season. On the market began to appear objects, the sale of which was postponed until the summer at a better price. And it is now that builders and developers have reached their boiling point, starting to adapt and rewriting pricing downwards.
Why did they keep prices high?
In already completed complexes or at the finishing stage flats were sold earlier at high prices. Of course, it is impossible to call the measure to reduce prices other than absolutely unpopular. Past buyers bought more expensive apartments and they will have an absolutely logical question, what about us?
It was difficult to renegotiate the terms of the contract with other participants in the construction, primarily the owners of land plots. It all takes time
Developers were waiting for the so-called season on the property market to start with the start of the tourist season. It can already be stated that it started sluggishly.
As a result, a straw solution was chosen - to reduce prices in order to finish construction with at least minimal delays, avoid bankruptcy, and launch new projects at new prices.
What was the result?
The cycle that everyone was waiting for has started. Property developers began to lower prices.
I will give a couple of examples.
Example No. 1
Glad to see you on the pages of my expert channel about foreign property.
Since February 2023 Turkey has been on the path of a major correction in the property market, which is developing according to academically predictable laws.
As a rule, at first, when demand decreases, prices do not move for quite a long time, at least half a year sellers and developers assess the situation, but what if it is a temporary period. The logic is generally correct, the property market does not like impulsive and ill-considered decisions.
Starting from autumn, prices on the secondary property market began to fall. Especially exposed to emotions of course were foreigners, they have somewhere to spend money unlike the owners of flats - native Turks. And the point of entry for many was in the past quite comfortable. For example, in Antalya in 2020 someone bought flats for 70-80 thousand dollars, and during the correction they could quite quickly conclude a deal at a price of 120,000.
In the secondary property market, the apogee of emotional sales and the lowest prices were at the end of winter. This is the deafest, so-called low season in Antalya, as well as in many holiday destinations. It is understandable, as the reason lies in the absence of buyers, who do not see the point of coming to the resort city in winter, especially after the past New Year holidays. It is also worth recalling that most buyers of foreign property by definition people with a high level of wealth and mostly entrepreneurs. Of course after January, February and March are some of the busiest months of the year, at least that's how it was for me when I was running my company.
At the same time, the developers kept their prices firmly in place throughout this period, watching with a dejected face the difference between similar flats on the secondary market and pevichka reaching 35-40%. But many people had a safety margin, and in general it was not small after the fat emotional 2022, so no one was in a hurry to rewrite prices. And the cost of construction has risen a lot lately: four reasons
- There is less land, land has become more expensive. All this is in the cost per square metre.
- The cost of construction materials has increased at least twofold over the last two years
- The average salary of builders now not less than 2000 dollars. Imagine) and the developers have a constant shortage of workers, despite such a large remuneration
All new complexes are built of higher quality materials, more modern in comparison with their counterparts built 5-10 years ago. The government has steeply taken on the developers, introducing a large-scale reform of the construction industry and a total system of control of all stages. And all this naturally in the cost of square metres.
That's why property developers have such gloomy faces. And now the main insider, which not many people know about. In Russia, the developer is a landowner, developer and contractor. With few exceptions.
In Turkey, the entire property market belongs to landowners who form the pricing rules for builders. And as a rule they are as follows - during construction 50% of the built flats at a certain price goes to the owner of the land, the rest is taken by the developer and some small part of the contractors as barter. And all this is within the framework of the concluded contract, which is not retroactive if there is no agreement between the parties. And this was the reason why developers were slow to change pricing, they were simply not allowed to do so.
Chronology of events
So, spring has passed, in the epicentre of which there were the most chocolate prices for buying secondary market flats and the tourist season has started. It got warmer. The buyers' market began to recede into the past and again the sellers rose up, dashingly rewriting prices for flats that were not sold in the low season. On the market began to appear objects, the sale of which was postponed until the summer at a better price. And it is now that builders and developers have reached their boiling point, starting to adapt and rewriting pricing downwards.
Why did they keep prices high?
In already completed complexes or at the finishing stage flats were sold earlier at high prices. Of course, it is impossible to call the measure to reduce prices other than absolutely unpopular. Past buyers bought more expensive apartments and they will have an absolutely logical question, what about us?
It was difficult to renegotiate the terms of the contract with other participants in the construction, primarily the owners of land plots. It all takes time
Developers were waiting for the so-called season on the property market to start with the start of the tourist season. It can already be stated that it started sluggishly.
As a result, a straw solution was chosen - to reduce prices in order to finish construction with at least minimal delays, avoid bankruptcy, and launch new projects at new prices.
What was the result?
The cycle that everyone was waiting for has started. Property developers began to lower prices.
I will give a couple of examples.
Example No. 1
The complex in Antalya in Hurma district is premium and expensive, where last year the average price for a 2+1 flat was at least 250.000 Euro. The developer from this week offered a new tariff grid, where a similar flat became worth 150.000 Euros. And this is in walking distance from the sea with a system ‘smart home,’ panoramic views of the mountains. The reduction was 40%. I am truly sorry for those who bought here last summer, but these are the realities of the crisis in the construction industry in Turkey.
Example #2
Example #2
Hotel type complex in a new area of Antalya with its own management company, short term rental licence at a distance of 3 km from the seafront. This is one of the most expensive locations in the area, as it is the closest to the coast. Previously the price of a 1+1 flat in this complex was 155.000 Euros, now the developer has revised the price list and offers similar flats for 125.000 Euros. Moreover, all this is also with 18 months instalments, ie you can pay after the end of construction in the summer of 2025. And part of the payments will be compensated at the expense of rent through the management company. According to my calculations in the end such a flat will cost less than 117.000 Euro or 11 million rubles. In fact, this is a profitable house near the airport, where rent will hammer in regardless of the tourist season.
And such examples on the market are now becoming more and more! As it always happens, the primary property market always comes with a delay of half a year - a year, here work other laws and not prevail emotions, but there is a dry calculation and agreements.
Now, as a result, the cost of 1+1 apartments with an area of more than 60 sq.m. in Antalya in a new house with a large hotel infrastructure is equal to the cost of small-sized apartments with an area of 25 sq.m. in Sochi, where there is no repair or infrastructure. Of course, the liquidity of such flats will be minimal in the future.
Summary
Turkey's construction sector will perfectly pass the correction phase in the market, the safety margin for property developers is huge. Moreover, for the country's economy, it is the main driver of tax revenues and a huge number of jobs. After passing the so-called bottom, which we are now witnessing, everything will recover as usual, and first of all prices. This will take two years, at least, which in general cannot be called a long time.
Previously, it was not quite correct to compare the purchase of a flat on the secondary market and the primary market, as the price difference was too great. At the same time, by definition, new complexes are built under the total control of numerous authorities, are much larger in scale, and many of them have the management company and short-term rental licence that foreigners need. Now the ball is on the side of developers - they have long instalments, and the liquidity of such real estate is many times higher compared to the analogues of 10-15 years ago, and the quality has improved a lot. This is how they started to take buyers away from the market, promoting a new trend with big discounts.
And such examples on the market are now becoming more and more! As it always happens, the primary property market always comes with a delay of half a year - a year, here work other laws and not prevail emotions, but there is a dry calculation and agreements.
Now, as a result, the cost of 1+1 apartments with an area of more than 60 sq.m. in Antalya in a new house with a large hotel infrastructure is equal to the cost of small-sized apartments with an area of 25 sq.m. in Sochi, where there is no repair or infrastructure. Of course, the liquidity of such flats will be minimal in the future.
Summary
Turkey's construction sector will perfectly pass the correction phase in the market, the safety margin for property developers is huge. Moreover, for the country's economy, it is the main driver of tax revenues and a huge number of jobs. After passing the so-called bottom, which we are now witnessing, everything will recover as usual, and first of all prices. This will take two years, at least, which in general cannot be called a long time.
Previously, it was not quite correct to compare the purchase of a flat on the secondary market and the primary market, as the price difference was too great. At the same time, by definition, new complexes are built under the total control of numerous authorities, are much larger in scale, and many of them have the management company and short-term rental licence that foreigners need. Now the ball is on the side of developers - they have long instalments, and the liquidity of such real estate is many times higher compared to the analogues of 10-15 years ago, and the quality has improved a lot. This is how they started to take buyers away from the market, promoting a new trend with big discounts.