Yavuz IŞIK
Chairman of the Board
Türkiye Hazır Beton Birliği
The year 2021 was quite an adventure for the Turkish economy. The high price volatility seen in every sector was also the number one issue in the construction sector. The latest data on the construction cost index is from November. Accordingly, the costs in the construction sector have increased by 49% in the last year. The rate of increase in November stands out as 7.77% compared to the previous month. We see a price increase of 50% on an annual basis in buildings and non buildings. This price increase occurs to cost inflation rather than demand inflation. While the rate of increase in material prices was 60% according to TUIK figures, the increase in labor costs was 22%. As the labor costs will increase after the increase in the minimum wage, construction costs will continue to be adversely affected. It should also not be forgotten that the December data, which has not been announced yet, have no effect on these figures. It is highly probable that the increase for the whole year will be much higher.
Increasing construction costs, especially with cost inflation, inevitably suppresses the demand for newly produced housing. Data shows us that consumers show interest in second-hand housing as they are not willing to take out housing loans. Despite the increase in the number of houses purchased with bank loans in the last two months of 2021, the rise in construction costs is one of the reasons behind the low demand for new houses throughout the year. In addition, despite the interest in low-interest housing loans provided through public banks, the unwillingness of private banks to cut interest rates on housing loans, the lack of liquidity in the economy and the fluctuations in the exchange rate caused a decrease in the sales of newly built houses.
There was a serious contraction in December
The Ready-Mixed Concrete Index, which we prepare monthly as the Turkish Ready Mixed Concrete Association, points to the acceleration in construction activities especially in August, September, October, and November, but also shows us that there was a very serious contraction in December. The demand for housing will increase in 2022 as the housing loan interest rate decreases. I believe that the construction sector will recover after the support of not only public banks but also private banks. Consumer’s retention of purchasing power for housing demand, economic stabilization and predictability stand out as critical factors in this sense.
