The FINANCIAL — The construction sector, badly hit by the global financial crisis, will not begin growing again until 2011 at the earliest unless the government makes major investments in infrastructure in the near future in a bid to rejuvenate the sector, a report by the Turkish Contractors Association (TMB) has stated.
According to the TMB's latest “Construction Sector Analysis” report, the sector, whose growth rate increased between 2002 and 2006, reached a peak growth rate of 18.5 percent in 2006. However, the sector saw a lower growth rate in 2007 and slid into contraction in 2008. The report pointed to the global financial crisis and a slump in demand for housing as the reasons behind this downturn.
"The construction sector enjoyed a 5.7 percent growth rate in 2007 followed by an 8.2 percent contraction in 2008. The sector contracted by 18.9 and 21 percent in the first and second quarters of this year, respectively. With an average contraction of 19.9 percent in the first half of the year, the adverse effects of the global financial crisis on the construction sector have been more severe than on any other sector, with the exception of wholesale and retail trade," Today's Zaman reports.
According to the report, the primary reason behind this contraction is a decrease in investments made by the private sector, which dropped by 34 percent in the first quarter of the year and continued to decline during the second quarter. The Turkish construction sector's heyday was between 2004 and 2006, thanks to a rise in housing demand that began to fall rapidly in 2008, causing contraction in the sector. The downtrend in the sector also influenced the geographic distribution of housing projects, moving from western to eastern Turkey.
The total square footage of projects granted building permits by municipalities in the first six months of this year decreased by 13 percent compared to the same period of last year. The number of buildings and flats also declined by 8.9 and 13.3 percent, respectively, in the January-June period of 2009 compared to the same period of 2008. The value of building projects granted permits also dropped by 20.1 percent in the same period. The number of houses sold in the second quarter of this year rose by 78.89 percent thanks mainly to private consumption tax (KDV) incentives, a drop in interest rates and attractive campaigns launched by contractors to clear their present housing stocks.
The total area of buildings granted occupancy permits in the first six months of this year increased by 20.2 percent over the same period of last year. While the number of buildings declined by 0.8 percent, the number of flats rose by 18.7 percent in the January-June period of 2009 compared to the same period of 2008. The value of buildings granted occupancy permits also increased by 11.1 percent in the same period.
Employment in the construction sector decreased by 25.3 percent in the second quarter of 2009 compared to the same period of last year.
The report stated that the Turkish construction sector saw a record contraction in the second quarter of this year and cited the global financial crisis, the slump in private sector investment and an inadequate increase in public investment as the reasons for this contraction. The only way to rejuvenate the sector, the report indicated, is for the state to focus on infrastructure investments. Otherwise, the report maintained, the sector will complete the year with a contraction of roughly 20 percent that will continue throughout the year 2010, with recovery beginning in 2011 according to the most optimistic prediction.
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