Confidence in Turkish construction

03 July 2012

Modest expansion is being predicted for construction in Turkey until 2014, with confidence felt to be at the same levels as last year.

Economic research company Buildecon said that ambitious government programmes in several segments of civil-engineering, and the increasing need for new projects because of the demographic boom in Turkey, led it to believe that the Turkish construction sector promised modest expansion until 2014.

It said that the shares of the subsectors within the total construction sector (residential, non-residential and civil engineering) were expected to remain unaltered, with only a minor drop in non-residential construction as a result of the overall economic slowdown.

It found that confidence was at approximately the same level as last year, while it felt another promising indicator was that 40% of construction companies surveyed said that they could not see factors that limited the activity of the sector.

Buildecon added, "Nevertheless, building construction is again challenged to strengthen resistance to earthquakes. Even recently constructed new buildings that had met the criteria on paper turned out to be rather vulnerable. In this regard, the general view on the structure of new buildings is not projected to change much between 2012 and 2014, as it did not alter in 2009 to 2011 either."

Buildecon reported that more than 55% of total construction output in 2011 had been registered in a residential sector that grew by 17.5% in 2011 against the previous year, and the number of completed new homes was the highest ever.

The sector is predicted to continue playing a key role mainly because of the fast-growing population and the big proportion of young people. Other major factors are the legislation amendments which aim to raise opportunities for construction, and the interest in the subsector by local and foreign investors. The impressive long-standing governmental urban regeneration project motivated by the danger of earthquakes, should also be a positive factor, said Buildecon.

There was a massive number of building permits issued in 2010, which Buildecon felt should feed residential construction with projects in the period of 2012 to 2014.

A drop is expected in 2012 in the number of completed buildings, but total completed floor space should continue to grow. The reason mainly lies in the new residential projects in cities with more units and floor space, it said.

Non-residential construction was also found to have produced a positive performance for the second consecutive year. In 2011, it increased by 10% on an annual basis.

The biggest share of this output was down to the construction of commercial buildings. In 2011, delivered office space, commercial buildings and hotels surpassed the completions of 2010.

According to Buildecon, "However, a slight performance is forecasted in the subsector until 2014. For instance, the number of issued building permits in all segments declined in 2011 compared to 2010."

Civil engineering

A negative performance of -3.9% was recorded for 2011 in civil engineering. The construction of energy facilities and transport projects - both road and rail - were among the strongest sub-segments.

"The government still endeavours to develop major infrastructure projects," said Buildecon. "Although the hard times for countries and investors of the European Union influenced and delayed some projects, the government seeks other opportunities for private-public partnerships with some Asian and Gulf countries."

The research company said that the construction sector in Turkey remained one of the main drivers of the national economy, and was increasing its share of the total GDP (gross domestic product) to almost 10% in 2012, as real growth rate of the sector was predicted to exceed 3%.

Together with construction growth, export of building materials from Turkey also grew considerably in 2010/2011. Buildecon said this was a trend which would linger over the next three years as a result of the rising quality of local production and its competitive prices.

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