The Turkey Construction Market is estimated to grow at a CAGR of approximately 5% during the forecast period, driven by the government’s plans to upgrade transport and energy infrastructure.
The Plunge in construction activity intensified in the year 2019, as the industry has seen a contraction by 8% in the real terms, further depleting from the value of 2.1% in 2018. The depreciation in the nation’s currency “Lira” and increase in the interest rates have pushed up the construction costs and borrowing costs. Due to this, many construction companies in the industry have halted the on-going projects and some have also reported bankruptcy.
However, Turkey’s construction industry is expected to recover from the current crisis and slump to reach USD 230 Billion during the forecast period. This is mainly due to the government’s vested interest in developing the nation’s transport, residential, and energy infrastructure. Added to this, the nation’s investments under its 11th 5-Year development Plan 2019-2023 under which the government aims to reach USD 1.1 trillion economies, as well as generate USD 226.6 billion of income from exports by 2023. The total construction project pipeline in Turkey stands at USD 508 billion. The pipeline, which includes all projects from pre-planning to execution, is relatively skewed towards late-stage projects, with 58.1% of the pipeline value being in projects in the pre-execution and execution stages as of December 2019. However, the ongoing currency crisis in the country, coupled with high unemployment, are expected to have a negative impact on Turkey’s economy, which could have an adverse impact on construction spending. Disputes between the US and Turkey are also expected to hold back the country’s economic growth over the forecast period. In October 2019, the US imposed a 50% trade tariff on Turkey’s steel, and halted trade negotiation talks with the country.
Although Covid’19 disrupted the various industries, public construction or in short construction has been one of the few industries that has maintained to some extent. The Construction Confidence Index, which is the only economic indicator that explains the amount of work that will be performed in the coming months’ time in residential and commercial construction sector increased by 31.5% in May’2020 as compared to the previous month.
Key Market Trends
Ongoing Demand & Projects in Infrastructure to Boost the Construction Sector
The construction sector in Turkey is expected to grow during the forecast period, main contributors being ongoing road and railway infrastructure projects, residential housing, office, and warehouse construction. The government’s focus to develop the energy sector – renewable energy – is also expected to drive the industry’s growth over the forecast period. In September 2019, the government issued a license for the construction of a nuclear power plant to Russia’s Rosatom. In addition, the Emba Electricity Production company, a joint-venture Chinese and Turkish company, is investing USD 1.7 billion to build the Emba Hunutlu power plant by 2021.
Under the 5-Year Development Plan 2019-2013, the country plans to build 13,478km of new roads, 5,748km of new highways, and 10,000km of high-speed rail network lines across the nation. The country is set to invest approximately USD 325 billion in various infrastructure projects during the year 2017-2023. Approximately USD 80 billion is set to be invested in the road infrastructure during this period followed by renewable energy and nuclear energy with USD 39 billion and USD 36 billion.
Some of the most important on-going mega projects include Istanbul New Airport, which is valued at an estimated USD 12.8 billion is expected to be completed by the year 2028. In 2019, the Turkish Government approved USD 3.5 billion to construct the Grand Istanbul Tunnel which is expected to be completed with in next 5 years.
Residential Construction Driven by Population Growth to boost the Turkey Construction Sector
The construction sector in Turkey is expected to grow during the forecast period driven by the population growth and which in turn drives the residential construction. In 2018, 56 % of the market share originated from the residential construction sector. The population in Turkey reached 84 million in the year 2019, an increase of 4% from the year 2016. During the first five months in 2020, the number of residential buildings sold in Turkey amounted to 434,757 out of which, Istanbul has the largest share with 48,752 (11.2 %) residential buildings sold. As compared to the year 2019, housing sales dropped by 2.2% or 9,684 units in 2020 during the first five months. In the capital city Ankara, the number of residential buildings during the period observed a share of 5.9% and racked up 25,163 units. The increase in population every year, the need for robust infrastructure, and housing have become a major essential to the nation owing to which the construction sector is expected to grow during the forecast period. The residential and foreign buyers investing in innovative and modern residential apartments in Turkey, ongoing promotional campaigns by banks, and easing of home loan interest rates are some of the factors contributing to the increasing residential flat sales in Turkey.
The report covers the major players operating in the Turkey Construction Market. The Turkey market is highly competitive with several players competing for the major share. The market is moderately fragmented, and the market is expected to grow during the forecast period due to the increase in the construction investments and up-coming major projects in the country and other few factors are driving the market. The key market players include Renaissance, Tefkan, Polimeks , TAAV, etc. Renaissance is ranked 33 in the top 250 World’s largest Construction companies by ENR magazine. With Green buildings being projected as one of the key trends in the Turkey construction industry, companies are largely investing in the R&D of materials to be used and this can be an opportunity for the new market entrants.
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