Profitability Analysis of Off Plan Projects in Istanbul

All off-plan projects in Istanbul purchased from the right location and the right contractor are invariably profitable.

Definition of the Right Location for Istanbul Investment Off Plan Projects

In the location of the Istanbul investment project, it is researched whether the established local population can afford the targeted sales price.

If there is more than a 50% difference between the household incomes of homeowners in similar projects for investment in Istanbul (15 times their income) and our targeted sales price, we won’t be able to reach our targeted price. As apartments in similar projects will be put up for sale, the supply in the market will increase, and we won’t be able to reach our exit price.

• x = Average household income of homeowners in similar projects in the area.
• y = Targeted sales price for the off-plan project.
• z = Acceptable difference between 15 times the average household income and the targeted sales price.

The formula to determine if the targeted sales price is achievable is:

$\text{z}=\left|15\times \text{x}-\text{y}\right|$

According to your statement, the targeted sales price is considered unachievable if z is more than 50% of y.

$\text{z}>0.5\times \text{y}$

So, the full condition to check if the targeted price is achievable is:

$\left|15\times \text{x}-\text{y}\right|\le 0.5\times \text{y}$

If this inequality is not satisfied (i.e., if $\left|15\times \text{x}-\text{y}\right|>0.5\times \text{y}$), then it indicates that the targeted sales price is more than 50% different from 15 times the average household income, making it unachievable according to your criteria.

If the location is right, each successfully completed project becomes a reference for the price of the new project starting.

By location, we don’t mean the province or district. We mean the neighborhood. Since Istanbul is one of the most populous metropolises in the world, large-scale demographic analyses at the province or district level can be misleading.

We achieve this by conducting a demographic analysis of the region. In essence, the purpose of all demographic analyses is to learn the social status of the household. We don’t ask how many people are in a household to sell diapers, nor do we learn about their education level to gift them books they might like. It’s about gathering clues. If the average age in a region is 40, they have an average of 3 children, and private schools dominate the area with increasing numbers every day, this is enough for us to make assumptions and reach the right information.

Definition of the Right Contractor for Projects for Investment in Istanbul

According to the regulations of the Central Bank, contractors can be granted a loan of up to 22% of the total cost of the project. The most expensive time for a project is at the beginning. This is an advantage for the Turkish economy but a significant risk for contractor firms. For firms that have been in the contracting business for generations, reputation is more important than money. These established firms, to strengthen their cash flows, conduct campaigns for loyal customers who have purchased from their previous projects. In doing so, they not only market but also avoid cash flow bottlenecks.

Another Reason for Definite Profitability of Off-Plan Projects in Istanbul

It’s the construction cost inflation. According to the official statistics of Turkey, construction cost inflation has increased by 300% since 2021. Branded contractor firms’ finance departments, considering this, guarantee the return of the marketing campaign conducted at the beginning of the project by implementing a price increase of 10-20% every quarter. Please Check the TUIK Statistics for Governemnt Official Information from the link

Since the cost prices are calculated in dollars, the marketing prices are also calculated in dollars, and sales are made in Turkish Lira.

Example Project for Investment in Istanbul

The launch of our example project was on June 12, 2023. They officially announced their sales with the Sales Office. Two months before this date, they made an announcement to loyal investors who had purchased from their previous projects. To learn which project this example refers to, you can contact us.

Maybe it is time to meet with bespoke and comprehensive services of Estates Istanbul, where your unique needs for profitable investment, elegant lifestyle, Turkish Citizenship, and Residence Permit are met with a-z tailored solutions. Whether you’re seeking a lucrative investment opportunity, a serene home, or navigating the intricacies of residency and citizenship in Turkey, Estates Istanbul is your trusted partner in realizing your aspirations.

Here’s a bullet-point summary of the “Profitability Analysis of Off-Plan Projects”:

• Inherent Profitability of Off-Plan Projects:
  • Projects in the right location and from the right contractor are consistently profitable.
• Defining the Right Location:
  • Importance of local population’s ability to afford the targeted sales price.
  • The need for a demographic analysis of the neighborhood, not just the province or district.
  • Large-scale demographic analyses can be misleading, especially in populous cities like Istanbul.
• Criteria for the Right Contractor:
  • Contractors are limited to loans up to 22% of the total project cost by Central Bank regulations.
  • Reputation is crucial for long-standing contracting firms.
  • These firms run campaigns for loyal customers to maintain cash flow and avoid liquidity issues.
• Construction Cost Inflation as a Profit Driver:
  • A 300% increase in construction cost inflation since 2021 in Turkey.
  • Branded contractors adjust prices quarterly (10-20% increase) to ensure profitability.
• Currency Considerations:
  • Cost prices are calculated in dollars, while sales are made in Turkish Lira.
• Example Project -Price Change:
  • Launched on June 12, 2023.
  • Sales officially announced at the Sales Office.
  • Prior announcement made to loyal investors from previous projects.