Earthquake rebuild fuels rise in Turkish construction hires

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• Construction employment up 11%
• About 1.8m workers in sector
• Rising costs remain a challenge

A sharp increase in hirings and orders point to a rebound in Turkey’s construction sector, although rising costs, high interest rates and weak demand for new residential properties remain big challenges to continued growth.

Employment levels in the construction sector reached 80-month highs in May and more than 1.8 million workers were on the books, data released by state statistics agency Turkstat on July 12 showed.

This represents an 11 percent increase on the same month in 2023, and 181,000 new positions have been added over the past year.

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Part of the new staffing results from reconstruction work in the country’s south-east, which was hit by the February 2023 quake. More than 680,000 residential units were destroyed, according to Kubilay Salihvatandaş, secretary general of İnder – the Istanbul Builders’ Association.

“We have not seen these employment numbers in the sector for a long time,” he told AGBI. “There was stagnation due to high costs, inflation and high interest rates. 

“Now there is intense rebuilding work in the quake-hit areas, boosting employment figures, with the government setting deadlines to deliver housing.”

Another factor in the upturn in the sector’s outlook is the state-backed programme to quakeproof existing buildings, especially in major cities, Salihvatandaş said.

“The state gives financial support amounting to half the cost of the building and also gives long-term low interest rate funds for those rebuilding. The demand is high and people struggle finding construction companies to undertake the work.” 

While order books are filling up, the sector still has to contend with rising costs, both for material and labour. Turkstat’s latest construction cost index, dated July 10, showed overall inputs for the industry rose 73 percent in May, well above the 58 percent production inflation figure for the month. 

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The biggest single contributor to this rise was labour costs, which climbed 109 percent year on year (reflecting a shortage of skilled workers), followed by a 59 percent increase in materials expenses.

Demand in the broader residential segment has eased this year, with sales down 3.4 percent in the first five months of the year, according to Turkstat data. 

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Although there was an increase in sales for May, when 110,588 units were sold, this was still down 2.4 percent on the same month last year, and less than 35 percent of sales were of new units.

This is set to change in the coming months, said Salihvatandaş, as inflation is expected to fall and interest rates to ease. 

“As inflation comes down, say in autumn, we expect to see the sector in better territory. Housing demand is still there, if there is access to easier loans it will make a comeback.”