Buying Property in Turkey — Part 2

I recently warned that buying real estate in Turkey was a big mistake. I gave several reasons, only to be told that one of my readers was going ahead with a purchase because he had been advised by a “reputable” London firm.

All I can say is that I hope he had second thoughts. But let me underline that previous recommendation to steer clear of a junk market.

Several things have been coming together recently to add to the standard disasters in Turkey. We all know that the country has serious internal strife: not the place one should move to or invest in. There are wars on both sides of the country, and religious intolerance is on the rise. But never mind all that, let us look at more general aspects that affect the country.

Turkey is regarded as an emerging market. That type of economy is in deep trouble because of a convergence of financial changes that are taking place in the international markets. I refer to low interest rates that have led governments to borrow heavily in the international markets, which usually means, getting US dollars.

The other problem is that the bond markets are turning round, and interest rates are on the rise.

When you are borrowing in dollars you are borrowing money denominated in a reserve currency. If you are the Turkey government, you are paying back in a weak currency. One small change in the market rates and you will get crucified. Let’s put some figures on this.

The Turkish lira has fallen about 20% against the US dollar so far this year. The chart is frightening. Four years ago you would get only 2.5 lira to the US$. Now you get 4.5. That is a hell of a currency crash.

Inflation there is running at 11%, which is pretty steep, and heading higher. Now look at the interest rate. It has just jumped from 13.5% to 16.5%. What is that going to do for mortgages? And what is that going to do for the property market which is dependent on borrowed money? Property prices are crashing.

Are things about to get better? On the contrary, they are about to get worse. The government plan is to borrow even more. And as the currency collapses those loans rise in value against the collapsing lira.

Interest rates have started to rise. It looks as though they will rise further. As the dollar rises and interest rates follow, so weaker currencies will fall. Already Argentina is collapsing. The Turkish currency is following. That will wipe out value in real estate.

Turkey is heading for a full blown economic crisis. THIS IS NOT THE PLACE TO INVEST. It is the place where you are guaranteed to lose money.

As I did warn earlier, if you buy real estate in a country then you are investing in that country. Would you invest in a risky company? Of course not, so why invest in a weak country? It will take your money with you as it tanks.

If some so-called reputable company tries to convince you that buying in these dumps is a good idea, take that advice for what it is: the company is talking its book. They need to sell you something to keep their business functioning so they will talk it up.

Don’t invest in Turkey or any of these marginal countries. You will regret it.

Buying Real Estate in Turkey

Buying Real Estate in Turkey

This excerpt is part of a longer article on buying property in Turkey, originally published at the end of 2012. I have been advising people to steer clear of this country for the past thirty years.

I am re-publishing this here for the simple reason that I do seem to have a continuing clientele visiting this site, but the main articles are now available from this website:

http://www.property.org.uk/unique/blogs/unique-property-blog.html

 

Two of you have asked about interesting properties for sale in Turkey. Unfortunately I cant find much. There obviously are interesting properties around but I suspect they are all in places none of you would be keen to move to.

One of the big problems with Turkey is that it’s borders are rather problematical.  If you look at a map you will note that although one of Turkey’s borders, it’s smallest, abuts the EU (or at least it does at the moment, maybe next year half that border will be with Greece). The rest, however, are dodgy areas.

The western half of the country abuts the Mediterranean, Greece, and the Black Sea, with a small border with Bulgaria. However, have a look at the borders to the eastern part of the country. Georgia (nasty trouble spot), Armenia (nasty trouble spot), Iran (potential third world war country), Iraq (already in civil war), Syria (already in civil war). I mean, guys, hold on, is this really a place you seriously want to invest in?

This is not for me, however, you’re asking the questions, so here we go.

First, I cant find many unusual properties in Turkey, which is odd because there are some very interesting cave homes in Cappadocia. They are well inland, to the eastern side of Turkey, so may not be of interest to those who dont speak Turkish. We are looking at an area well away from tourist spots, in a rural mountainous zone, not that far from the border with Iran, with a Kurdish hot-spot not far to the south. Are you still interested? ………

If you wish to read on, go here