Developers may scale down projects as costs rise
Construction companies are scaling down their development projects in the face of the rising costs.
The latest data showed that the construction cost index rose by 90.3 percent in February from a year ago, after increasing by 80 percent year-on-year in January.
The increase in the cost of construction materials was 113 percent, while labor costs in the industry went up 41 percent.
Overall construction costs rose nearly 6 percent on a monthly basis in February.
“If this trend continues and costs keep rising, developers will only focus on smaller projects. The cost of the houses put up for sale on the market is higher than their prices,” said Nazmi Durbakayım, the head of the Istanbul Contractors’ Association (İNDER).
At least 600,000 to 700,000 new houses should be developed each year in Turkey, he added.
“When house supply is not enough, rent prices are also rising. Developers already had hard times during the pandemic and then emerged some other unfavorable development. The housing supply should increase when developers begin new projects. But they are hesitating because of high costs,” Durbakayım explained.
Costs of some construction materials have increased three-fold, which makes it for companies to launch new projects, said Süleyman Çetinsaya, the chair of construction company Artaş İnşaat.
“We are working to finish the developments we already started, but we need to be more cautious about the projects in the pipeline. It looks like the companies in the sector will focus on smaller projects,” he added.
The residential property price index increased by 13.1 percent on a monthly basis in January for an annual rise of 77.4 percent, according to the latest data from the Central Bank. In real terms, the annual increase was 21.2 percent.