New Record in Construction: Building Production Index Reaches Historical Peak

The building production index reached its highest level ever in January. Industry professionals stated that with increasing demand and signs of interest rate cuts, developers have taken action to boost supply.

According to data released by the Turkish Statistical Institute (TÜİK), the construction production index in January increased by 15.5 percent compared to the same period last year. This increase is the highest growth recorded in the past 9 months.

This index had reached 17.9 percent in April 2024 but experienced fluctuations in the following months.

Among the two main components of these data, the building production index attracted attention by setting a new record. The seasonally and calendar-adjusted index reached 152.1 points in January, marking the highest figure since the publication of this data began in January 2017.

Thus, the building production index reached its highest point in 97 months. The previous record was 144.9 points in December 2024 and 138 points in January 2018.

Construction sector professionals emphasized that the increase in housing sales since the second half of last year has contributed to production growth. They also pointed out that the start of interest rate cuts and the expectation of their continuation this year are factors supporting increased production.

On the other hand, the annual increase in construction costs decreased to 26.61 percent in January, marking the lowest figure in 49 months, which has also incentivized higher production.

Increase in Housing Production; A Sign of Improved Supply

Engin Keçeli, President of the Association of Builders and Real Estate Developers (İNDER), described this record in the building production index and the rise of the construction production index to the highest level in 9 months as "a positive and significant development" for the sector.

Keçeli said: "Developers are returning to construction. We must increase production because it has dropped significantly in recent years. If we don’t produce, there will be no apartments left to sell after autumn. With the continued decline in interest rates, we expect a significant boom in housing sales in the second half of the year."

Keçeli emphasized that housing production must increase considerably as the current production level does not meet demand. He added: "There is demand, and we need to boost supply. These figures are also an indicator of this trend. Both production and sales will rise, and all developers are currently preparing to meet the active market demand."

Booming Demand and Inventory Depletion Encourage Developers to Produce More

Mustafa Ekiz from the real estate and construction platform also stated that the trend of decreasing interest rates has heightened inflation expectations, resulting in continued growth in housing sales.

He mentioned that housing sales have steadily increased since the second half of last year and added: "One of the key factors behind this growth is citizens redirecting their savings from markets such as gold, bank deposits, and foreign currency towards real estate."

Ekiz pointed out that nearly 1 million 158 thousand housing units have been sold over the past 8 months and said: "Now, the existing housing stock has been depleted, and two-thirds of these sales were for second-hand units. For this reason, the production of new units needs to increase, and we are currently seeing developers moving in this direction."

He explained that Turkey needs to produce around 800 thousand housing units annually, but current production levels are below this figure, adding: "The vitality of demand, depletion of inventory, and the slowing pace of construction cost increases have encouraged developers to ramp up production."