The Turkish construction industry is currently going through a period of restraint. Due to the sluggish development of the domestic market, many companies are hesitant to take on new projects.
Rising costs, high interest rates and unpredictable financing conditions pose major challenges for new residential construction. As a result, there has been a noticeable decline in the issuing of building permits.
Current building permit statistics show that in the second quarter of this year, the number of approved buildings fell by 22.7%, the number of residential units fell by 28.9% and the total floor area was reduced by 30.9%.
The number of housing units approved for construction during this period was 137,210, one of the lowest figures for a second quarter since 2009, excluding the pandemic-affected year of 2019.
Increase in foreign investment in the first half of the year
Turkish construction companies are increasingly turning to international markets in response to the economic slowdown at home. Data from the Turkish Central Bank (TCMB) shows that Turkish construction companies invested $253 million in overseas projects in the first half of this year, surpassing the total investment of $159 million for the whole of 2023. This represents a significant increase from the $50 million invested in the same period last year.
Despite the challenges in the domestic market, many companies remain interested in investing in Turkey. These companies expect demand for housing and are waiting for more favorable economic conditions.
Some expect interest rate cuts by the end of the year, with a possible impact on lending rates forecast for the first quarter of 2025, which will lead to preparations for new domestic construction projects.
Increasing interest of Turkish investors in foreign real estate
While the number of foreign buyers purchasing a home in Turkey has declined, Turkish private investors are showing increasing interest in purchasing properties abroad. According to TCMB data, private property purchases reached $1.2 billion in the first half of this year.
The Association of Real Estate Exporters (GIGDER) estimates that Turkish investments in foreign real estate, which were at $130 million annually five to ten years ago, could reach $3 billion by the end of this year.
Conversely, foreign purchases of Turkish real estate fell 42% year-on-year in the January-July period, totaling 12,811 units. By the end of 2024, foreign real estate sales are expected to reach between $2 billion and $2.5 billion.
