Turkey's yearly requirement for new residences is forecast at around 600,000 units, according to a report in Business New Europe (BNE), a magazine about business, economics, finance and politics in the dynamic new markets of central, eastern and southeast Europe, as well as the former Soviet Union.
BNE reports that over the past decade Turkey's housing market has grown significantly, on the back of general economic improvement, declining interest rates and increased disposable income, as well as demographic trends like population growth, urban migration and diminishing household size.
The increase in housing demand stemming from the current annual population growth rate of 1.3 percent is estimated to require the construction of nearly 400,000 homes each year. Total demand for residential housing is likely to be even higher, as this figure does not reflect the expectations of continued demand for higher-end residential housing as a result of rising income per capita and additional demand stemming from urban migration.
Mentioning that any hike in construction costs, including cement and steel prices, hurts developers' profitability, BNE expects high construction material prices to continue to squeeze the profitability of projects in 2011. Referring to the data released by the Turkish Statistical Institute (TurkStat), BNE said that the building construction index increased by 12.8 percent year on year in the second quarter of 2011, mainly due to a 15 percent rise in material costs. In addition, BNE cited the data released by REIDIN, the real estate information company focusing on emerging markets, which indicated that housing prices have increased by 13 percent since March 2009, when they were at historic low levels in Turkey. BNE added that current prices are still eight percent lower than the peak levels of March 2008.