CIC - Construction Intelligence Center

Healthy growth is expected in Turkey's construction industry, but there are downside risks

20 Jan 2017

Turkey’s construction industry is expected to expand at a healthy rate over the forecast period (2016–2020), driven by public and private sector investments in infrastructure, energy, residential and industrial construction projects. Growth will also be spurred on by the country’s Vision 2023, under which the government aims to develop the country into one of the world’s largest economies by 2023.


According to latest projections from Timetric’s Construction Intelligence Center (CIC), the industry’s output value in real terms is expected to rise at an annual average of 5.2% over the forecast period; up from 2.9% over the preceding five-year period. The industry is consequently expected to rise from a value of US$96.0 billion in 2015 to US$123.6 billion in 2020, measured at constant 2010 US dollar exchange rates. 


However, there are downside risks relating to rising costs in the industry as well as the increasingly authoritarian tendencies of the current governing administration. According to the latest data available from TurkStat, during the first nine months of 2016, the building construction cost index rose by 6.2% year on year, the labor cost index increased by 10.6% and the materials cost index rose by 4.9%. The rise in costs is partly driven the depreciation in the lira, which has made imported materials much more expensive to domestic contractors. 


On the political risk front, an attempted coup in July 2016 failed to oust President Tayyip Erdogan, primarily because the effort was poorly planned and did not have sufficient public support. In the wake of the failed coup, the president has tightened his grip on power and intensified his efforts to crackdown on his opponents in the military and judiciary. This risks undermining foreign investor confidence. 


Residential construction will remain the largest market in the industry, supported by ongoing urbanization, population growth and positive developments in regional economic conditions. Efforts to balance demand and supply for housing through the construction of affordable housing units will also promote growth.


The demand for schools, healthcare facilities and government buildings will also increase as a result of population growth and urbanization. 


With the aim of becoming the world’s 10th-largest economy by 2023, significant infrastructural investments are expected over the forecast period. The government aims to increase the length of the rail network from 12,000km in 2015 to 26,000km in 2023. Of the total, 10,000km will be a high-speed rail network. As part of the country’s Vision 2023 TRY149.6 billion (US$55.0 billion) will be invested in the railway sector. There are also plans to expand the road network to 70,000km by 2023 – of which dual carriageways will make up to 36,500km and 8,000km will be highways. Consequently, further investments are expected in the transportation sector.



About this report


This information is taken from the Timetric report: ‘Construction in Turkey: Key Trends and Opportunities to 2020'.


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CIC clients can access the report here


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Source: Company Press Release