How’s the property market doing? Investors' intuition and instincts are telling them one thing, but the news and statistics are saying something else... For real estate investors experiencing this dilemma, these charts tell why…. 

In Miami, the statistics show foreign home buyers are disappearing. For the year ending July 2018, foreign buyers purchased about $23 billion of South Florida real estate, down 5% from the previous year, at 19% of existing home sales versus 21%, previously. The share of foreign buying in South Florida nearly doubles the US national average of 10%. Canadians and Brazilians bought the most, 52,000 properties, a decrease of 15%; Latin American and Caribbean buyers together amounted to 36%, Canadians 22%, Europeans 19%, and Asians 11%. A strong dollar, higher global interest rates, and declining local currencies have virtually eliminated buying from Mexicans, Argentineans, and Venezuelans. The decline in sales is particularly notable in the million dollar segment.

In Turkey, official statistics of property purchases by foreigners in October showed that Iraqis topped the list with 1,439 units, followed by Iranians with 557, Kuwaitis with 378, Germans with 341, and Russians with 336; whilst the largest segments of foreign buying in the previous cycles from, British, and Swedes increased from virtually non-existent levels by 131 percent, and 137 percent, respectively, directly correlated to the recovery in tourism this summer. For the record, the official prognosis in Turkey, is …’ we may sell 40,000 units to foreigners in 2018, this is a historic record for our country." Such optimism is remarkable, considering the influx of foreign residential ownership for the first five years of the previous boom totalled some 50,000. And those 50,000 were primarily to northern Europeans, sales at significantly higher prices and larger profit margins. Perhaps in the context of ebullient enthusiasm, it’s worth remembering, that similarly optimistic forecasts of the return of Russian buying in 2017, amounted in the end, to a mere total of $ 1 million….

 The current outlook in both Miami and Istanbul has now pivoted sharply, each in different directions.  Developers in Miami are halting new construction, as properties, such as Miami Beach’s Sunset Island II,  are lingering on the market for more than six months. Instead of selling in one month, on a first visit, the buyers are more cautious, visiting three or four times. In Istanbul, developers are now rejoicing at having buyers return, whilst competing to sell un-moved inventory.

Reflecting the US situation in a global context, with Istanbul as an example, is relevant because the US market directly influences global interest rates, and thus global real estate markets. In September, Bank of America signalled the peak of the US housing market, citing declining affordability, greater price reductions, and deteriorating housing sentiment. The effects are impacting real estate markets globally. Three month Libor interest rates, the benchmark for more than $ 30 trillion of global borrowing, mortgages included, is in a sustained uptrend.

The significant insight, is that markets are peaking at the end of the current cycle, without having attained the pricing or profitability of the previous cycle.  This is the reason why residential investors intuition is not corresponding with the news, because investment returns are not matching up to those enjoyed near the peak of the previous cycle, nor to the bullish press-releases of the real estate media. 

Evidently, as is plain to see in the charts above; each new financial bail-out by Central Banks, has a diminishing impact on economic activity and wealth creation.

Special Thanks for Graphics, to Lance Roberts via RealInvestmentAdvice.com…

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Are the authories in Turkey introducing new measures to enforce the use of Habitation Certificates (Iskan / Building Utilisation Permit) ?

From our clients mytapu.com has learned that fines are now being levied by the local fiscal authorities upon owners of properties without an Iskan (Habitation Certificate).

How are the properties detected? When does this occur? How much are the fines?

This is quite likely the result of an introduction of new and tighter enforcement measures- and this does not need confirmation from official sources, as such enforcement measures have long been promised - but are these measures being applied in all locations uniformly and immediately, or gradually with local variations?

If you have been notified of receiving a fine, or advised that you will likely receive one, please share your experiences with other readers in the comments below, and we shall endeavor to provide feedback.

Update Sep 2018

More about Fines for not having a Habitation Certificate:

• Failure of constructors to pay the taxes and fees to obtain habitation certificates has deprived the Turkish Treasury of substantial sums over previous years.
• This year fines are being levied upon the filing of tax returns- typically of villa owners that are generating holiday rental income... as with many things in Turkey, this is not yet applied with uniform consistency in all locations.
• Fines are also levied as the result of court action, for example, where a complaint is filed concerning an illegal construction, extension etc.
• The amnesty procedure provides for a cost effective way to collect the unpaid revenues due the Treasury- not a fine strictly speaking, but the revenues are collected just the same...
• After the amnesty expires, one would expect the enforcement measures to be applied with another step up in severity and compliance. 
• A reasonable presumption would be that this will ultimately lead to a prohibition of transfer of title at Land Registries on properties without iskan- meaning before you sell, you have to get the iskan; and this will likely be more costly after the amnesty expires. Finding buyers prepared to wait is not a viable sales strategy - how many will?
• The amount of the amnesty application cost, and the amount of fines being levied now, is not 'unreasonable' in the context of the initial cost payable for the iskan at the time previously.
• There is no telling what the fine may be in the future; it may have a punitive element in it; it may have an alternative procedure (the conventional procedure is exceptionally complicated, relies on third parties and can not be done by the home owner easily); it may have an indexed value; and it may likely be subject to increase by multiple percentages over the years, not unlike changes in the tax rates; so these are headaches hanging over a property owners head.

For these reasons this issue is not to be ignored, because it definitely will effect you, or your widow or heirs, the only question is when...and  perhaps that will be when you least expect it or can least deal with it.

More questions or clarification needed ? Find out more here…