The sudden devaluation of the Turkish lira this week has made the country’s real estate up to 20% cheaper for buyers with dollars or British pounds to spend.
Worsening trade relations with the United States paired with President Tayyip Erdogan’s hostility toward Turkey’s central bank sent the lira into a tailspin over the past week. The Turkish currency dropped more than 30% from Aug. 7 to hit record lows on Monday of TRY7.24 to US$1.
It’s unknown whether the volatile currency will bounce back quickly (as of Tuesday it was valued at TKY6.37 per US$1), but the crisis presents an opportunity for foreigners and Turks holding foreign currency to use the favorable exchange rate to buy second homes, real estate experts say.
“You might see the lira bounce back in the next hour, day, week or it could be long-term. But without a doubt there is a buy opportunity at the moment,” said Julian Walker, director of Spot Blue International Property Ltd., a London-based Turkish real estate portal that has seen a bump in recent days.
“Our online traffic is rather healthy at the moment,” Mr. Walker added.
The lira stabilized on Tuesday, but house hunters with euros, pounds or dollars to spend would still get anywhere from a 12.5% to 21% discount compared to only a week ago, according to exchange rates Tuesday evening.
For example, a TKY10 million villa that would have cost an American roughly US$1.9 million last week, would now set him or her back only US$1.57 million, a hypothetical savings of more than US$300,000.
Outside of real estate, luxury consumers with foreign money seized the opportunity the lira crisis presented this week, with tourists forming long lines outside of Louis Vuitton, Prada and Chanel in Istanbul, according to published photographs taken in the city on Monday.
Indeed, booming tourism in Turkey, particularly from the Arab Gulf and greater Middle East, this year is likely to aid the country’s property industry through 2019, Mr. Walker said.
“Tourism fuels the property market,” he said, and this year has already been exceptional in spite of the state’s political and economic woes. Turkey logged a record 11.5 million foreign tourists in the first five months of 2018, a 31% jump over the same period last year, according to the Culture and Tourism Ministry. Mr. Erdogan has said that he expects Turkey to host a record 40 million tourists by the end of the year.
Darren Edwards of Luxury Property Turkey said the brokerage, which focuses on the high-end market in Turkey and Bodrum, on the Aegean Sea, sees a 50/50 split between domestic and foreign buyers. Recently, the agency has seen robust interest from the Middle East, including Kuwaitis, Jordanians and Lebanese.
A favorable exchange rate will help sweeten the deal for those foreigners recently beguiled by Turkey’s sandy Mediterranean beaches and cosmopolitan Istanbul. The Turkish lira has slid roughly 20% against the Kuwaiti dinar and Jordanian dinar since last week.
The good news for foreigners comes in stark contrast to the mood among Turkish buyers and sellers.
The shock this week is just the latest in a series of political and economic strains, which include a failed coup d’etat in 2016 and increasingly fraught relations between Turkey and its NATO allies over Syria. Before the sudden drop on Thursday, the Turkish lira had been steadily declining for around 11 months.
As a result, its luxury real estate market, which roared into life over the past decade, has cooled. Prime prices in Istanbul fell 2.4% in June compared to last year, according to recent data from brokerage Knight Frank.
This latest economic crisis has sellers worried about home values.
“Since Thursday, I’ve had a lot of calls from sellers nervous about their asking prices and nervous the lira could fall further,” Mr. Edwards said. He added that he wouldn’t be surprised if the currency woes force sellers to be a “little more adventurous in their negotiating.”
Concerned domestic buyers have also called Mr. Edwards since the lira began its freefall last week to ask about what it means for the banking industry and mortgage availability.
He’s advised that the crisis is unlikely to affect lending since a large cohort of foreign shareholders keep the Turkey’s banking industry stable.
“Maybe we’ve seen the worst of it,” Mr. Edwards added. “I don’t think it’s a disaster.”
Cindy Uriona, a broker and owner of Luxurion Real Estate Group in Istanbul, said many wealthy Turks felt the economic pressure building for months and have taken their liras out of the country to purchase second homes in Greece, France, England and the U.S.
But the devalued lira has now made homes in those places significantly more expensive for Turks looking to pick up assets outside of the country.
“Until we get more stability…this is pumping the brakes for many of them who haven’t taken action yet,” Ms. Uriona said.