Turkish contractors’ investments abroad up fivefold

Gülistan Alagöz – ISTANBUL

Players in the construction sector have recently adopted a wait-and-see attitude. Stagnation due to rising prices and high interest rates, unpredictable cost increases and the problem of access to financing have created a significant obstacle to the supply of new housing. As a result, there has been a serious decline in the number of permits issued for new construction.

According to the latest building permit statistics, permits for the number of buildings, the number of flats and the area of flats decreased by 22.7 percent, 28.9 percent and 30.9 percent, respectively, in the second quarter.

The number of housing units permitted for construction in the second quarter was 137,210. Excluding the pandemic-affected 2019, it was the lowest second-quarter data since 2009.

Construction companies have turned abroad to create an alternative to the stagnant market.

According to the Central Bank's data, the amount of investments made by Turkish construction companies abroad in the first half of this year exceeded the investments they made in the whole of last year.

In the first half of this year, Turkish contractors' investments abroad, which were $159 million in the whole of 2023, reached $253 million. In the first half of last year, this figure was recorded as $50 million.

On the other hand, many companies have not given up on investing in Türkiye. Seeing that there is a demand for housing, companies say they are waiting for the right time to invest. Forecasting that interest rate cuts will start at the end of the year and be reflected in loan rates in the first quarter of 2025, companies are preparing for new construction sites in Türkiye.

While the number of foreigners buying homes in Türkiye is declining, individual investors in Türkiye are increasing their purchases from abroad, with individual real estate purchases rising to $1.2 billion in the first half of the year, according to the Central Bank. The Real Estate Service Exporters Association (GİGDER) announced that Turkish real estate purchases abroad, which were around $130 million annually five to 10 years ago, could reach $3 billion by the end of this year.

Housing sales to foreigners in Türkiye decreased by 42 percent in the January-July period compared to the same period last year and became 12,811.

Sales to foreigners are expected to reach $2 billion to 2.5 billion by the end of the year. Both GİGDER and the leading associations of the sector state that there will be a current account deficit in 2024 in the real estate sector for the first time.