Kalkan for holiday home and investment

Updated: 13 September 2014 Created: 25 February 2014
Just over a 90 minute journey from Dalaman International airport (being the nearest), Kalkan, or Kalamaki as it was called by its Ottoman Greek settlers some 200 years ago, is one of Turkish Mediterranean's best kept secrets. We have heard Kalkan being likened to Positano of Italy's Amalfi coast, yet, Kalkan is arguably prettier and certainly more contemporary.  Having said that the point of this article is not how charming Kalkan is but how and why you can build a nest egg by investing in a property in Kalkan.  

Panoramic Kalkan Bay

Kalkan from 1980 to 2014

Until the early 1960's, Kalkan was highly inaccessible for there was not a coastal road connecting Kalkan to other towns along the south coast of Turkey or inland. It was an isolated little harbour town, Kalkan around 1950'sa small fishing village which gathered around what's now known as the old town and the harbour area. Areas such as Kisla, Kiziltas, Ortaalan and even Kalamar did not even exist. They were mainly olive groves. The old town of Kalkan consisted of its ancient harbour, cobbled streets and Ottoman-Greek houses typical of the Mediterranean and Aegean coasts of Turkey. These lovely houses can still be admired in the old town of Kalkan tastefully restored and properly renovated.   
In 1984 the coastal road was laid to asphalt and widened putting Kalkan more firmly on the coastal map of Turkish Mediterranean region. Until then, Kalkan was only known to a small number of keen sailors, who would venture out of the bays and coves of Gocek and Fethiye toward the more exposed Mediterranean waters. Those, who came, fell in love with this pretty little place that seemed to have preserved its authentic charm dating back several hundred years and over thousand years before then if we look at Kalkan in antiquity. As a matter of fact a handful of those sailors are now settled in Kalkan.  Kalkan started developing beyond its old Kalkan in 2012town boundaries in the early 1980's.  Early developments came in the form of small family run hotels and holiday homes built by admirers of Kalkan from larger cities of Turkey, who saw Kalkan as an ideal getaway, a perfect retreat from the hustle and bustle of large cities. With the mid to late 80's tourism started picking pace, however, Kalkan still remained relatively small and tucked away.  

It was not until Dalaman airport started bringing in overseas holiday makers in mid 80's that Kalkan saw a rapid increase in its international profile. The first area to develop beyond the old town was Kalamar bay area, where you can find older style houses built on relatively small plots during the 80's. During the 80's and 90's emphasis was not necessarily on creating visionary living spaces but to build a 'roof over one's head' so to speak.  Therefore some of the older houses built in this period in Kalkan and Kalamar are not necessarily the most attractive properties today.
Throughout the 90's Kalkan saw slow but steady expansion. The town and its population grew beyond its old boundaries. However, the real expansion of Kalkan came after year 2002, when Turkish government lifted existing restrictions on property ownership by foreign nationals.   
In the 12 years from 2002 to 2014, Kalkan grew faster and bigger than it did in the preceding 200 years. The shape and face of the area changed almost beyond recognition. If you had visited Kalkan say in the late 80's and returned 25 years later, you simply would not believe your eyes. However, once you drove down into the old town and the ancient harbour area, then you would hear yourself saying "indeed, this is the same old charming town I visited 25 years ago, interesting how they managed to preserve the authenticity of the old town despite unbelievable growth around it, well done...". 

Kalkan houses can it grow moreCan Kalkan grow any larger?

Simple answer is 'highly unlikely'. Kalkan is shaped just like an old Roman amphitheatre with the old town in the centre and the bay surrounding it with steep mountains to the back cutting sharply toward the Mediterranean sea. In other words, there is very little zoning left for Kalkan to grow any larger.

There are still some land plots available above the D400 main road in Kiziltas area connecting Kalkan to Fethiye and Antalya, however, there is only a limited supply. Komurluk area is almost fully built up and what remain are the 'green belt' areas, where construction is strictly prohibited. Similarly Kisla and Kalamar areas have almost reached full potential, leaving a handful of remaining land plots for new builds in the Ortaalan district of Kalkan, where we see the most contemporary designs being the last area to develop.     

In a highly desirable place such as Kalkan, given very limited supply of new houses, the number one rule of economics is bound to come into effect. High demand and limited supply dictates that existing goods will appreciate in value.  Scarcity of supply always pushes up prices. Applying this to our lovely Kalkan means that in the medium to long term (5 - 10 years max), resale properties in Kalkan will command exceptional premiums, especially if they are smartly built and have those breathtaking views that Kalkan is known for. 

Kalkan centre, Komurluk, Kisla, Ortaalan, KalamarMain districts of Kalkan

When you stand in the authentic harbour area in Kalkan old town facing toward the sea, the area immediately to your left after the old town is Komurluk, which is one of Kalkan's most desirable yet least available areas. Komuruk offers some very nicely built stone-clad villas at the seaside, some with water access. If you follow the coast further left, then you will arrive at Kisla, some 20 minutes walk from Kalkan harbour. Kisla is arguably where you have some of the most amazing views of Kalkan old town and the bay. Also, very desirable with some of Kalkan's best beach clubs. Kisla is a mix of stone-clad more authentic builds and some modern contemporary architecture, the latter being the new build houses constructed since 2008.
Still looking out toward the sea, to your right is the established Likya Evleri or Likya Estate, where some very decent villas come to market occasionally.  These are older style houses, however, some have been very nicely redecorated and refurbished, worth a look. Cross over the little hill from Likya Estate and you will arrive at Kalamar Bay, another little bay twinned up with Kalkan Bay. Kalamar Bay is mainly residential with some old family hotels and a spectacular sunset. There are some lovely seaside homes in Kalamar Bay area, however, plot sizes are smaller than say Ortaalan and Komurluk.
Now turn your back to the sea and look up. Although you won't be able to see beyond the old town, if you could then you would see another growing settlement above the main D400 road. This is Kiziltas area. Currently Kiziltas area is regarded as less desirable than say Komuruk, Kisla or Ortaalan, however, in our opinion it has excellent potential for views are absolutely picture perfect being higher elevated and looking out toward the entire bay from a further distance. In addition, plot sizes are larger here giving a higher level of privacy.  

Then comes Ortaalan (the mid area) a little higher up in between Kalkan centre and Kalamar. Ortaalan is Kalkan's very last district to open for zoning and hence development. Majority of properties in Ortaalan were built after 2005. Some of Kalkan's most exciting contemporary houses are located in Ortaalan area, where architects started pushing the boundaries of modern design concepts. The area affords excellent views toward both bays and is within easy reach of Kalkan centre, hence very desirable.  

Why are property prices in Kalkan going up so fast?

If you have read the above, you have probably already answered this question, however, just to underline the main factors pushing up real estate prices in Kalkan - Property prices in Kalkan going up
  • Exceptionally charming place that attracts the more discerning holiday-maker as well as home buyer. Distance from the nearest airport acts as a major barrier for 'package holiday makers' therefore mass-tourism can not flourish. This maintains Kalkan's charm as an 'elite' and 'boutique' resort for the 'more discerning'.   
  • Growth is restricted due to landscape and geographic factors, therefore mass construction is not possible. Demand is increasing year on year against a backdrop of diminishing suply, thus pushing up land prices and property prices in turn. 
  • Due to limited level of new build houses in Kalkan, a strong resale market is bound to emerge in the forthcoming years. This will assure a strong exit strategy for investors looking to cash in their healthy gains. 
  • Owning a holiday home in Kalkan is a direct route to building a successful nest egg due to incredibly high VIP villa rentals. There are no large hotels in Kalkan, holiday makers in search of privacy tend to pay premiums to rent attractive villas for their family holidays. A well serviced villa will easily attract 20+ weeks from May through to October.

Is buy to let a good idea in Kalkan?  
A buy to let in Kalkan is not a good idea - it is an excellent idea. A successful investment strategy aims to achieve the following

Kalkan ticks all of the boxes above. An attractive 3 or 4 bedroom villa in Kalkan fetches anywhere from £800 to £3,500 per week depending on its location, view and design (what we call the WOW factor).  Our analysis shows that 4 bedroom villas located in Kisla, Komurluk and Ortaalan districts of Kalkan attract the highest rental yields (that is the ratio of rental income to purchase price). Gross yields in excess of 7%pa are easily achievable with little input from property owners in the way of appointing the right management company and using the right marketing avenues to attract villa rentals.

Kisla Kalkan villa rented outA case study of rental yield achieved in a Kalkan Villa
4 bedroom contemporary villa in Kisla 100 metres to sea (built in 2010)
Current market value £600,000 - £630,000
Weekly rentals averaged in 2011, 2012 and 2013 amount to £3,000 per week
Average weeks rented in 2011 - 2013 period achieved 18 weeks
Total average annual rental income in 2011 - 2013 period £54,000
Costs of management and maintenance average per annum £12,000
Net rental income to owner £42,000
Annual rental yield achieved 7% (net)

Note - Of the management and maintenance costs, £2,000 is maintenance and £10,000 was the fee of the rental company that managed the rentals on behalf of the owner. Some property owners in Kalkan manage their own rentals and only use maintenance companies for pick ups and cleaning, pool maintenance, etc. In other words net yield could be further increased with some personal time invested by the owner.  

Buy to let in the UK versus holiday home in Kalkan (as featured in the Telegraph, UK on 2 Sept 2012) 

We have carried out a simple analysis looking at a buy to let in the UK compared to a holiday home in Kalkan that is rented out around 18 weeks a year giving ample personal use as a holiday home in the meantime. 

UK buy to letThe article that was titled 'go cold Turkey on UK property' looks at two UK residents, one buys a buy to let in the UK and the other purchases a villa in Kalkan. Both invest £300,000 in year 0 (which is now).  Both sell their properties after 5 years, that is in year 5. The UK buy to let owner rents his property out full time and the Kalkan holiday home owner rents it out 18 weeks a year only.
After 5 years, the Kalkan property generates £30,000 more in rental income compared to the UK property despite the fact that is only rented out 18 weeks a year and used for at least 4 weeks a year by the owner and his family.  However, what's even more striking is that UK price growth predictions compared to price growth projections in Kalkan underlines that the Kalkan holiday home owner stands to gain significantly more in terms of value appreciation when he sells his property in year 5.  Price growth expectations, based on historic data and analysts future projections, indicate that at year 5 the Kalkan property will sell for in excess of £400,000, that is over 33% growth as a very conservative estimate. Some analysts put this figure at almost £475,000 (58% growth in 5 years in Kalkan), however, we take the most conservative approach. UK price indices estimate that the property in the UK will rise in value to £350,000 after 5 years, this is a 17% increase.Kalkan holiday home rented out
Therefore, before accounting for any taxes, the Kalkan investor is better off compared to the UK buy to let investor as follows

  • Rental income £30,000
  • Profit on sale £50,000
  • Total £80,000 (the investor, who put his money in Kalkan turns out £80,000 better off than the investor, who puts his money in a UK buy to let). 

Notes - the analysis above does not apply to bank repossessions and purchases significantly below market value. It assumes that both properties (the UK and Kalkan ones) are representative of the areas they are purchased in at market value.  

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