A strong construction sector in Turkey

A strong construction sector in Turkey

A recent analysis by financial analysts in Turkey, looking specifically at the cement sector, report strong growth statistics for construction. In a report from Raymond James, it was noted that the number of dwelling units according to the construction permits, reported by the State Institute of Statistics, had signaled a turnaround in 2003, which was on a declining path since 1997, and had grown by 27% YoY. Furthermore, the number of dwelling units jumped by 69% in the first half of 2004. GDP growth in 2005 is estimated at around 5% and construction is expected to rise accordingly. Besides local demand, reconstruction activities in Iraq have also led to a stronger construction sector in Turkey due to exports. Statistics given for the cement sector show exports directed to Iraq reached 698K tons in 2003 from 155K tons in 2002, making up 9.5% of Turkey's total cement exports. Finally, another boost to the construction sector in Turkey is the introduction of a Mortgage system and Turkey's convergence to the EU. The government has been working on a mortgage system and it was recently reported that a written proposal prepared by the Capital Markets Board regarding a mortgage system was submitted to the Prime Ministry and the mortgage system is anticipated to be implemented as of the second half of 2005. This system, producing longer maturity and more favorable terms for loan takers, is one of the major projects to revive the construction sector. In addition, Turkey's convergence to the EU is also anticipated to have a positive impact on the economy and the construction sector as well. An easier access to the European market and FDI inflow will stimulate construction demand for residences, factories and infrastructure.