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Why is it profitable to invest into physical assets/real estate?

Have you already purchased properties in your home country and are now considering investing in the Turkish real estate market? Approximately 95% of our clients already own at least one property or made other investments in their home countries.

Why Turkey is an advantageous location for property investments.

TABLE OF CONTENTS

  1. Monetary depreciation
  2. Why Turkey?
  3. Metropolitan areas in Turkey
  4. Cryptocurrency
  5. Why real estate?

l. Monetary depreciation

In the USA, the United Kingdom, and also in Europe, the inflationary effects of the Corona Pandemic are becoming more and more visible. The pandemic has had a massive impact on logistics delivery costs around the world, the consumer price index in the US has risen 7.5% year over year, the highest increase in inflation in the last 40 years.
The UK is not far behind with a price increase of 5.4%. So if you know that these kinds of inflationary measures are creeping in, especially in developed economies, then raising interest rates to curb inflation is a tool for policymakers.

In Turkey, the annual inflation rate in 2022 was around 30% compared to the previous year. The difference between the inflation rate and the interest rate results in negative equity. This means that our money in the bank loses value due to annual inflation. Inflation leads to monetary depreciation, meaning keeping your wealth in the bank seems like a bad idea.

Il. Why Turkey?

One of the main questions is: where and how to invest not only to generate income but also to preferably minimize the value risk?

Several reasons why Turkey is a good choice for property investments:

  • excellent value per square meter.
  • A diverse portfolio.
  • A simple buying process.
  • Excellent investment opportunities.
  • Tourist attractions.
  • A constantly growing economy.

In times of uncertainty, people tend to invest in tangible assets, i.e. due to strong demand, your investment in real estate is likely to increase in value. The running costs of a property such as maintenance fees, household bills, council tax, etc. are far cheaper than in most European countries and the USA. Furthermore, living expenses in Turkey are considerably lower than in many other countries.

Conclusion: Real estate is an inflation-proof investment.
Hence the fact that material value beats monetary value.

III. Metropolitan areas in Turkey

The demand for properties in metropolitan areas will increase continuously, which means real estate in the cities of Istanbul, Bursa, Ankara, and Antalya will keep increasing in value. Increasing demand; the metropolitan areas in Turkey are constantly growing and the demand for quality housing is increasing rapidly.

If we take a look at real estate prices in Istanbul over the last three years, it becomes obvious that real estate prices have increased in all parts of the city and some areas have experienced exponential growth. Added to this is the intrinsic value of the real estate. Historically speaking, real estate assets are among the safest investments that survive most crises.

In the end, real estate is the only capital investment whose return is constantly and continuously increasing.

On top of that, as real estate assets are valuable long-term investments they constitute popular inheritance assets .

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IV. Cryptocurrency

Cryptocurrencies are digital currencies that are intended to be used to purchase goods and services. Some individuals, however, also invest in them in order to trade for a profit.
While there are countless currencies flooding the market, the most well-known crypto is Bitcoin, which was created in 2009 by Satoshi Nakamoto, a pseudonym for the person or group behind Bitcoin. Bitcoins are produced by “mining”, which involves computer software solving complex mathematical problems. Once the problem is solved the miner is rewarded with Bitcoin.

The Pros and Cons of Investing in Crypto

Crypto is different from traditional currency as it is decentralized and no one entity regulates or has control over it. Bitcoin transfers are easily done through a series of privately connected computers that share a ledger. Each time Bitcoin is transferred, it is publicly shared via the blockchain. There are also a limited number of bitcoins in circulation, so a government cannot simply print more. This protocol makes cryptocurrency rather inflation-proof and is one of the big reasons why people are so interested in Bitcoin.

While crypto has several aspects that interest investors, there are also substantial drawbacks. First, it is not a tangible asset. You cannot hold a Bitcoin in your hand because it only exists virtually. This opens the door to cyber-attacks along with other types of cyber crimes that could alleviate your investments. This lack of transparency also makes it hard to determine the true value of a coin, which can lead to it being traded for a value higher than its actual worth. These factors contribute to the fear of crypto being a bubble ready to burst and investors losing their money. Additionally, there are no dividends or rents paid by owning crypto, so no passive cash flow opportunities. Really, the only way to make money with crypto is via capital appreciation (an asset increasing in value) that you’ll realize at the sale of the coin.

Another downside to crypto is the high volatility. As you might have already noticed, we’ve had to note multiple times that the current values of the coins are what they are currently trading for at the time this article was written.

Lastly, governments worldwide do not currently regulate the use and trading of cryptocurrency, which seems unlikely going forward if cryptocurrency becomes more mainstream. However, it is doubtful that government agencies like the IRS will find a way to regulate the sale and transfer of cryptocurrency. When it inevitably happens, though, the value of the coins will likely decrease - look at what happened in China a few years ago when they banned crypto trading.

V. Why real estate?

One of the real estate investment advantages is that you will get a tangible asset - one that you can see, touch and feel. It has intrinsic value because of what it is, not because people attribute a value to it. Real estate is also a necessity, as people will always need a place to live with their families.

As an investor, you will also have the opportunity to force the appreciation of the asset. You can make strategic improvements, which can result in higher monthly rents and, since real estate investments’ values are based on the net income they produce, increase the value of the property. These improvements can range anywhere from doing new paint and elevations on the exterior of the property to security improvements or even a full rehab on the interior.

Real estate also brings in a steady source of income - passive cash flow! These monthly rents can be used to cover the mortgage payment on a property, and all expenses, and leave plenty of room for profit. Rents will also typically increase with inflation, making real estate a suitable hedge against inflation. One of the most outstanding benefits of being a real estate investor is the tax breaks and deductions that you’ll receive when owning real estate, which can make it more profitable than other forms of investment.

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Timondro
Property specialists

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