Large interest rate drop

[Scunner]

Leave that to Stoop, but how about looking at it like this - even if the average net interest rate over those 15 years was only 20%, people made £300,000 to live on (and have 15 years not needing to work!) from an initial investment of £100,000 (which they still have too). I'd call that a pretty wise investment.

What you want to know is how much is their initial investment worth now - my answer is around £12,000 a year to live on.

Now if they had spent half their interest and invested half back in (as spending £20,000 PA on living in Turkey in 1993 is a little flamboyant), then you will see a more realistic reflection of the financial status of the long term ex-pat in Turkey.

[loz]

13% (or more)interest less approx 18% tax on the interest, many are under the illusion that you get the whole of the interest, the interest is taxed.

[starman]

but rememebr the investment is converted into Turkish lira when first depositing the money in the bank.
ie. 100,000 pounds at the 1992 rate of 8700 old lira to the pound would be 870 million old turkish lira. The same amount stayed in the account and nothing was added to it and you lived off the interest to live on.

[Colwyn]

In the absence of Stoop I will have a go at the calculation; he can check it when he has time.

Fifteen years ago, on the 9th March 1994, £1 would buy 32,597 (old) TL. The investment pot of £100,000 could be exchanged for 3,259,700,000 TL. If the investor paid the tax due and then spent all the remaining interest on living expenses the capital sum (in lira) would remain the same. By 31 December 2004 the exchange rate was 2,589,004: £1 so the capital sum was worth £1259. On 1 January 2004 this was revalued at 2.59 YTL: £1 (so the capital sum was 3,260 YTL - still worth £1259 of course). Today the sum in the bank would remain at 3,260 TL and the interest available for living expenses (@ 13%) would be 423.80 TL per annum. In sterling terms the lump sum would be worth £1304 and living expenses £170 per annum. So, if you had invested in 1996 would have spent virtually all of your money by January 2005 and would not have enough to live on.

This is the point that Starman is making. Scunner makes a different point and says you need to re-invest much of the interest earned in order to build up the capital. This is a much more complex sum - so I'll leave it to Stoop. I suspect for the period 1996 to 2004 you would have found it very difficult if not impossible to maintain your capital. However, if you had invested in January 2005 you would have done rather nicely. So, the question is are the next few years going to be like 2004-2009 or are they going to be like 1996-2004?

[starman]

Just also note that apart from the last 5 years or so, the lira as been devaluing consistently over the last 100 years.
Basically I just wanted to make the point that those that plan to live off the interest in the short term would benefit but those that plan to be here for 10 years or more should really think about what they are doing and even thoughyou may never convert itback to pounds and always keep it in lira, just remember that when I first moved here a beer cost 5000 lira (0.5 new kurus) but now costs 10 lira (10 million in old money)

[c1]

pound has lost value approx 25% against euro in last 3 years or so,what has stabilised lira could it be that turkish banks not so heavily hit by american down turn. always spread your risk uk banks on desopit now loses money with inflation still around 3% return on deposit 1.5% approx changing by the week.10 lira for a beer? last summer still around 3-5 lira in bars

[stoop]

Excellent post Colwyn and you have saved me a job on a busy Monday (for me anyway).

In all honesty no one really knows what the future holds and that's why I urge caution for those looking to live off the interest for the rest of their lives.

[starman]

quote:Originally posted by c1
10 lira for a beer? last summer still around 3-5 lira in bars

Maybe in Calis but up here if you want a beer in a decent establishment then 10 lira is the norm. I go to the W and thats the price there but if I went to sunset or reina then could be looking at 20-25 lira for a beer and then the cheeky car valet expects another 10 lira off you.

[Ian]

Outlook cut and higher-than-expected inflation data - 9th March.

 
S&P said in a statement the revision caused by "fraught political and global environment that the country faces in the near term."

S&P affirmed the 'BB-' long-term foreign currency and 'BB' long-term local currency, 'B' short-term foreign and local currency sovereign credit ratings on Turkey, and 'trAA+' long-term and 'trA-1' short-term Turkish national scale ratings.    

"The deteriorating macroeconomic environment threatens to aggravate Turkey's external vulnerability and skew the risks to its fiscal and economic prospects to the downside," S&P credit analyst Farouk Soussa said in a statement.

This massive cumulative inflow has subjected the relatively shallow Turkish domestic and foreign exchange markets to pronounced downswings when foreign investors withdraw their funds en masse in response to either changing global liquidity conditions, or a perceived increase in domestic risk, S&P said.

Such swings may have a detrimental effect on Turkey's creditworthiness if they are prolonged, raising the government's financing costs and negatively impacting the domestic economy, it added.

"In recent months, global liquidity conditions have been deteriorating, darkening Turkey's financing outlook, and heightened domestic political uncertainty significantly exacerbates this effect... The increasingly challenging political and global environment that Turkey faces in the near term raises the likelihood of a prolonged deterioration in Turkey's financing conditions," Soussa said.

Turkish State Minister and Deputy Prime Minister Nazim Ekren, one of the highest economy officials, said on Thursday he thought the revision of S&P's on Turkey's rating was not an evaluation related to Turkey's economy.

The Turkish lira weakened on Thursday after the ratings agency outlook revision and March inflation came out higher than expected.  The lira rose as much as 1.3085 against the dollar in Friday-dated interbank trade, weakening from a close of 1.2815.

The Turkish Statistics Institute said on Thursday Turkey's consumer prices rose 0.96 percent month-on-month in March, above forecasts, for a year-on-year rise of 9.15 percent. The producer price index rose 3.17 percent in the month, also well above forecasts, for an annual rise of 10.50 percent.

Sort of sum's it up really - fear of political instability and the global downturn resulting in investors removing their stock / funds from the emerging economies (read for emerging "riskier") could result in a testing period for the YTL - hold on for the ride?

Ian

[christygee]

quote:Originally posted by tribalelder

The exchange rate only comes into it if you are changing sterling in to TL and if you live here your savings are probably in a Lira account so it is academic.  How absolutely wonderful to only Get 15%gross.....I am delighted.....How ever would I manage in the UK with the same savings on about 3% and a much higher cost of living

and wot bank are you in as yapi is only doing 12.45 per cent