Turkish construction firms turn to overseas markets

The Turkish construction industry is currently navigating a period of caution, with many companies reluctant to initiate new projects because of a sluggish domestic market.

Rising costs, high interest rates and unpredictable financial conditions create significant challenges for new housing developments. As a result, there’s a noticeable decline in the issuance of new construction permits.

Recent building permit statistics indicate that in the second quarter of this year, the number of buildings granted permits decreased by 22.7%, the number of housing 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, marking one of the lowest figures for a second quarter since 2009, excluding the pandemic-affected 2019.

Increase in overseas investments during the first half of the year

Turkish construction companies are increasingly turning to international markets in response to the domestic slowdown. Data from the Central Bank of Türkiye (TCMB) shows that in the first half of this year, Turkish contractors invested $253 million in overseas projects, surpassing the total investment of $159 million recorded for the entire year of 2023. This represents a significant increase from the $50 million invested during the same period last year.

Despite challenges in the domestic market, many companies remain interested in investing in Türkiye. These firms, anticipating a demand for housing, are waiting for more favorable economic conditions.

Some expect interest rate reductions by the end of the year, with potential impacts on loan rates projected for the first quarter of 2025, prompting preparations for new domestic construction projects.

Rising interest in overseas real estate among Turkish investors

While the number of foreign buyers purchasing homes in Türkiye has decreased, individual Turkish investors are showing increased interest in acquiring properties abroad. According to TCMB data, individual real estate purchases reached $1.2 billion in the first half of this year.

The Real Estate Exporters Association (GIGDER) predicts that Turkish investments in overseas real estate, which stood at $130 million annually 5-10 years ago, could reach $3 billion by the end of this year.

Conversely, foreign purchases of Turkish properties fell by 42% in the January-July period compared to the same period last year, totaling 12,811 units. By the end of 2024, foreign real estate sales are expected to reach between $2 billion and $2.5 billion.