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| Building industry shrinks 4.3 percent |
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ISTANBUL - The sharp decline in property prices has impacted the Turkish construction industry, which is expected to shrink a further 1.1 percent in the last quarter of 2008.
The Turkish construction industry has shrunk 4.3 percent in the third quarter of 2008, according to a report issued by Yapý Endüstri Merkezi, or YEM.
The industry has suffered in the global financial crisis after investing a total of YTL 70.1 billion in the first nine months of 2008. Hopes for 2009 do not look good either, according to the report.
After the industry’s heyday in 2005 and 2006 with a growth rate of 20 percent, it went through a period of uncertainty in 2007 due to the general elections and could not recover in 2008. It was dealt a psychological blow with the mortgage crisis that started in the United States and spread worldwide. The sharpest fall in gross national product occurred in the construction industry.
Battle between demand and supply
As a result of the psychological battle between demand and supply due to the sharp decline in global property prices, the Turkish construction industry is expected to shrink a further 1.1 percent by the end of 2008, the report said, adding that where is no hope for a better year in 2009 either. Industry representatives requested an aid package worth YTL 20 billion from the government. At most, there is hope 2009 will be similar to 2008. If the government does not intervene, a crisis will be inevitable, industry representatives said.
The YEM report said growth of the construction industry, which started in 2004, and continued in 2005 and 2006, was a result of home construction with a share of 60 percent of total construction activity. The demand boom, however, went into a recession in the second half of 2006. For this reason, the growth rate of the construction industry started to decline in the second quarter of 2007. The lowest growth rate for the past three years was reached in the last quarter of 2007 with 5.7 percent. Investments could only grow by 5.5 percent in 2007, whereas this figure was 13.3 percent in 2006.
Record decline
Every other industry except construction was able to finish the nine-month period with growth. Construction grew by 1.5 percent in the first quarter of 2008 and shrank by 0.2 percent and 4.3 percent in the second and third quarters respectively, thus resulting in a total 1.1 percent decline in the first nine months of the year.
The number of building permits issued, a reliable indication of construction investment, declined 20 percent in the second half of 2008 compared to the previous quarter. The number of permits issued was a mere 500,000. Even with calculations disregarding seasonal changes, a constant decline in home permits was has been visible since the second quarter of 2007.
Total national investment reached YTL 147.1 billion in the first three quarters of 2008. Nationwide investment entered a serious recession compared to the previous year with a growth rate of 0.9 percent. Construction investment, however, in the first nine months of the year was at a total of YTL 70.1 billion. The growth rate of construction investment was 3.8 percent in the public sector whereas private sector investment shrank by 0.5 percent.
The world will recover from this global crisis with the help of developing markets, said Haluk Sur, head of the Urban Land Institute, or ULI. "The current crisis is not a mortgage crisis. It is a crisis of miscalculation of financial risks." |
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