Despite the ongoing global economic crisis, the real estate sector in Turkey has revived in recent months. It is rapidly increasing in both pace and volume. Moreover, in some situations, the pandemic even created some positive outcomes; it has directed buyers to more spacious and comfortable properties such as houses. Besides this, it has updated the requirements for real estate functionality and as a result, has significantly increased the «average bill».
The interest in the construction of detached houses continues to grow as buyers focus on safer housing as well as more proximity to nature and fresh air. As a result, the number of licenses for private residences including those built according to specific rather than standard projects has increased by 2.5 times.
What’s more, because the market of free housing for rent noticeably decreased and demand exceeded supply (it has become almost impossible for students and other young people to find an apartment at all), this has stimulated the construction of new residential development projects throughout the country.
An important task to be addressed is the rapid tariff growth for construction materials which leads to the price growth of real estate. In these instances, developers hope for price regulations at the state level.
The Emlakkulisi portal explains that in a recent meeting with businessmen in Kocaeli, Finance Minister Lutfi Elvan made several important statements regarding macroeconomic data. In particular, he confirmed that the previously recorded trend of growth in the volume of investments in the economy continued in the third quarter of 2021 including the real estate sector.
It is impossible to ignore the noticeable and accelerated pace of construction of new properties. According to the Turkish Statistical Institute (TÜIK), the area of development projects increased by 45.3% in just the first 6 months of 2021 compared to the same period last year and amounted to 65,400,000 sq. m. The number of apartments increased by 49.8%.
The area of houses that received permission from municipalities for commission increased by 3.3% and reached 57,000,000 sq. m. The number of apartments reached 3.4% with 279,635 development projects.
This was in just 6 months.
According to the dynamics that can be seen in the statistics provided by TÜIK, municipalities issued a construction permit for 1,405,447 apartments in 2017; in 2018, this figure was 669,165; in 2019 it was 319,722, and finally, in 2020 it was 554,437. The number of apartments that received a construction permit (commissioned) also increased compared to 2020 (599,532). However, the previous years were not bad with 894,240 apartments in 2018 and 738,889 apartments in 2019.
The President of the Istanbul Builders Association (INDEX), Nazmi Durbakayim, said that the hopes for an end to the coronavirus pandemic and the activation of the sector were justified. This is confirmed by the increase in the number of construction permits received and real estate commissions. «We hope that the normalization process will continue and new restrictions caused by the pandemic will still be avoided. The entire construction sector has high hopes for the near future but new projects will continue to appear one after another», he said.
Thus, the number of construction permits received in the first 6 months of 2021 is the highest in the last 4 years. The real estate sector began to decrease after the crisis in 2017. In that period, the applications for the construction of 1,400,000 residential real estates were successfully approved. However, in 2019 there was a rather sharp drop as licenses were obtained for only 320,000 residences.
After the first half of 2020, not only did the construction sector but also the whole country’s economy plunged into suspended animation for weeks and months because no one knew what to expect from the COVID-19 epidemic. Sanitary regulations and mechanisms to protect the health of employees were not developed so almost all work was suspended except for the necessities. In other words, Turkey is just now entering a period of resumption of intensive housing construction, the first signs of which began to appear at the end of 2020.
Thus, only in January-June 2021, the number of successfully commissioned properties (residences) reached a threshold of almost 280,000. That is 10,000 more than in January-June 2020 (despite the beginning of the pandemic, quite a lot of properties were handed over because they were being built months or even years before the sad moment when global borders began to close). Moreover, this was more than in 2018 and 2019.
Over the past 4 years, 3,066,000 properties have been commissioned. A total of 2,949,000 residences have received new construction licenses.
| The number of apartments with issued construction permits | First-quarter | Second-quarter | First half | Third-quarter | Fourth-quarter | Second half | Total |
|---|---|---|---|---|---|---|---|
| 2017 | 238 680 | 430 573 | 669 253 | 537 481 | 198 713 | 736 194 | 1 405 447 |
| 2018 | 142 131 | 220 259 | 362 390 | 139 794 | 166 981 | 306 775 | 669 165 |
| 2019 | 76 229 | 45 096 | 121 325 | 55 859 | 142 538 | 198 397 | 319 722 |
| 2020 | 81 245 | 137 755 | 219 000 | 141 333 | 194 104 | 335 437 | 554 437 |
| 2021 | 172 734 | 155 308 | 328 042 | ||||
| The number of apartments issued commission permits (residence) | First-quarter | Second-quarter | First half | Third-quarter | Fourth-quarter | Second half | Total |
| 2017 | 196 683 | 195 193 | 391 876 | 184 117 | 257 724 | 441 641 | 833 517 |
| 2018 | 207 521 | 202 451 | 409 972 | 204 213 | 280 055 | 484 268 | 894 240 |
| 2019 | 249 937 | 145 826 | 395 763 | 147 991 | 195 135 | 343 126 | 738 889 |
| 2020 | 155 931 | 114 468 | 270 399 | 153 655 | 175 478 | 329 133 | 599 532 |
| 2021 | 159 081 | 120 554 | 279 635 |
What do the figures above tell us?
By the end of 2017, contractors had received a large number of construction permits. According to these licenses, they began to build apartments. In the next 3 years, houses were successfully built and put into operation.
Nowadays, it is impossible to find out for sure how many residences with permits in these projects have been sold or how many are still on sale.
However, it is obvious that taking into account the number of new construction licenses, experts assure that in the near future «... we will have worthy housing stock».
To this end, market players are already quite boldly declaring a record to be expected by the end of 2021.
Conclusions announced by KPMG analysts:
«From the third quarter of 2018 to the second quarter of 2020, the decline in the construction sector was about 7%. During 8 quarters, a 4.7% growth was recorded for the first time in the third quarter of 2020. This was positively affected by the state campaign for the sale of residential real estate aimed at reducing the existing «free» housing stock that covered the low interest rate on housing loans established by the state last summer, support under the Credit Guarantee Fund (KGF) and cash loans exceeding 49,000,000,000 Turkish liras. It was implemented within the framework of a public-private partnership to reduce the negative impact of the pandemic period on the real estate sphere.
What are the results? The construction sector has comfortably entered 2021 when considering newly opened liquidity opportunities in 2020. The expansion of lending options that contributed to the sale of residential real estate last year supported the construction industry. However, in the first quarter of 2021, a tight monetary policy and high interest rates slowed down this effect. The second quarter of 2021 suffered from the third wave of the pandemic and restrictions. In this context, it is predicted that the transition to active growth in the construction sector will begin in the second half of the year».