Today, November 23, the exchange rate of the Turkish lira against the dollar reached 13.6, after it was only 8 days ago, that each dollar equals approximately 10 Turkish liras only.
This sharp decline in the exchange rate of the Turkish lira reminds us of what happened in late 2018, when the exchange rate of the Turkish lira fell from 4.7 per dollar to 7 liras in less than a week, and the important question here regarding the real estate investment field is what should the investor do in these cases, but Before we answer it, we must know what are the causes of these accidents so that the answer to the important question is sufficient and convincing.
What are the reasons for the decline of the Turkish lira against the US dollar in November 2021?
The main reason is to reduce the interest rate from 16% to 15% and the Turkish President’s decisions regarding the continuation of a plan to reduce interest, regardless of the consequences. These statements are in addition to the fluctuation of the Turkish lira under foreign pressures and fears from investors regarding the stability of the exchange rate and speculation in the stock market on the Turkish lira, All of this led to this decline. There is also no doubt that the political situation in the neighboring countries and Turkey’s role in them negatively affect the performance of the Turkish lira.
To read the reasons in detail, we previously wrote two articles that you can refer to:
As for the Turkish economy, it achieves very high growth rates and exports are preparing to exceed imports during the next year, and therefore there is no real problem in the economy as much as pressures on the exchange rate of the Turkish lira, and now we come to the important question, which is what should the foreign investor do in this case?
If you are looking for an investment that is 99% safe and completely guaranteed, put your money in an American bank and get a return of 0.5% annually and at best 1%.
But if you are an investor, you realize that the more investors fear from a sector, the higher the chance of making big profits. The Turkish real estate market is the right place for you, and the cases in which the Turkish lira declines against the dollar are golden opportunities for those who take decisions quickly, exclusively because when the exchange rate varies greatly We have the following scenarios:
- If the exchange rate was for the sake of simplification 10 and immediately moved to 15 and therefore the property, which was priced at one million Turkish liras and equivalent to 100 thousand dollars, now its price remains one million Turkish liras, but it became equivalent to only 66 thousand dollars, and we told the owner of quick decisions because the delay will generate the following scenario for us :
- In the event that the investor delays in making a decision when such opportunities occur, the projects will adjust their prices based on the new exchange rate, and even the resale apartments will be calculated again on the exchange rate of the Turkish lira against the dollar, and it is very possible to find the pricing of apartments in dollars if the exchange rate is unstable.
For example, a property whose price was one million Turkish liras when the exchange rate was 10 liras will become one and a half million Turkish liras when the exchange rate becomes 15 liras.
- The third scenario when the investor buys a property when the exchange rate changes from 10 liras, for example, to 15 liras per dollar, and after purchasing the property, the exchange rate rises to 20 liras per dollar. Here, the following must be distinguished:
When the exchange rate rises significantly, real estate projects adjust prices immediately, and this is what we noticed when it decreased from 9 pounds to 13.4 pounds within two days in November 2021, and this increase is very large and fast, and therefore the delay in making the decision in order to wait for greater benefit is often not in the interest of the investor.
What about the investor who bought the property with 100,000 dollars for 66,000 dollars after changing the exchange rate from 10 liras to 15 liras as a matter of simplification and then continued the decline to reach 17 liras, and therefore it was possible for the investor to get the same property worth about 58 thousand dollars before That the construction companies raise the price as we mentioned at the beginning of this point, and here we can say that it is a quick opportunity that does not make sense to benefit from it 100% and you must be a satisfied investor. With a profit of 35% in your pocket already.
In order for your investment to be as productive as possible, remember the following points:
- Invest in projects under construction in their early stages, after learning about the history of the construction companies themselves, to avoid project stoppage or delay, by communicating with a well-established investment advisor in the market.
- If you choose to pay in installments, the installments should be in Turkish lira, because the probability of its continued decline against the dollar in the coming years is much higher than the possibility of its rise.
- The time before the project is completely delivered is often the best time to finish your short-term investment, and you can make sure of this by obtaining a consultation from an investment expert.
- You can postpone the sale until the project is fully completed if the project is more than one stage and you purchased from the first stage.
- The principle of short-term investment has proven its effectiveness over the past years (two to three years) and as long as it brings you profits, it is better to continue with it.