Despite 20% Real Growth in Construction Spending, Private Sector Remains Cautious
The Turkish Contractors Association (TMB) has released its Construction Sector Analysis Report for the third quarter of 2025. According to the report, the construction sector grew by 10.9% in the second quarter, outperforming the overall economy. In Q2 2025, construction spending rose nominally by 48.1% to TRY 2.29 trillion, marking a 20.2% increase in real terms. However, the report underscores that the private sector continues to act cautiously in the face of weak demand, noting: “The predominance of public-funded investments, the private sector’s cautious stance amid weak demand, and restrictive credit conditions for housing have created uncertainty regarding the sustainability of growth.”
As the umbrella organization of the construction sector—which maintains its locomotive role across the economy by driving demand and employment in more than 200 sub-sectors—TMB published the October 2025 edition of its widely followed analysis report titled “The Global Economy’s Search for Balance.” The report provides a comprehensive assessment of global and national economic developments as well as current data on the construction industry.
Construction Sector Continues to Grow
The sector posted growth for the eleventh consecutive quarter in Q2 2025. According to TurkStat, construction spending increased by 48.1% in nominal terms to TRY 2.29 trillion and by 20.2% in real terms. The report cautions, however, that investments are largely public-funded: “The private sector’s cautious approach in the face of weak demand and the restrictive effect of credit conditions on housing demand have created uncertainty about the sustainability of growth. Meanwhile, real estate activities—despite modest momentum—expanded by 2.6% in Q2 2025, reflecting a weak performance.”
The report adds that turnover index data also indicate a rising share of construction in overall economic activity. In August 2025, the combined turnover index for industry, trade, services, and construction rose by 36.7% year-on-year, while the construction turnover index climbed 53.2% over the same period. Although the construction production index fell 0.9% month-on-month in August, it maintained its growth trend with a 25% year-on-year increase. Building construction rose 26.6% year-on-year, civil engineering 17.4%, and private construction activities 25.1%. These figures signal sustained demand in housing and commercial investments, with public projects providing steady support to the sector.
Regulatory Changes Highlight Digitalization and Transparency
The report notes that September amendments by the Ministry of Environment, Urbanization and Climate Change to the Regulation on the Classification and Registration of Building Contractors and the Regulation on Site Managers introduce significant innovations. With new digital monitoring practices for site managers, daily progress, machinery in use, and headcount will be recorded in the system—an important step for digital transformation, transparency, and efficiency in the sector.
Revisions to contractor classification aim to authorize firms based on financial and technical capacity, strengthening the qualification framework. The report also cautions that loosening contractor criteria could pose risks for safe construction and overall building quality.
Turkey Retains Second Place Globally in Overseas Contracting
The Turkish construction industry maintained its strong international position in the first nine months of 2025, undertaking 128 new projects worth USD 9.2 billion in January–September. Since 1972, Turkish firms have carried out 12,665 projects in 137 countries, with a total value of USD 546.5 billion.
Romania ranked first among countries with the most awarded work during this period at USD 4 billion, followed by Iraq at USD 1 billion. Turkish contractors retained second place with 45 firms on ENR’s “Top 250 International Contractors” list, a key benchmark of global prestige. The presence of eight Turkish firms in the top 100 once again demonstrated the sector’s international competitiveness.
Key Findings on the Construction Sector in Q3 2025
Housing Sales Hit Year’s Peak While Real Prices Decline:
In September 2025, housing sales across Turkey rose 6.9% year-on-year to 150,657 units. Total sales in January–September reached 1,128,727, up 19.2% from the same period last year. Istanbul led with 24,119 sales, followed by Ankara and Izmir. Mortgaged sales in September increased 34.4% to 21,266, accounting for 14.1% of total transactions. The Housing Price Index (HPI) rose 1.7% month-on-month to 195.7 and 32.2% year-on-year in nominal terms; however, a 0.8% decline in real terms indicates price increases lagged inflation.
Sales to Foreigners Continue to Decline:
Home sales to foreign buyers fell 7.7% in the same period to 1,867 units. Istanbul, Antalya, and Mersin recorded the highest volumes. Russian, Iranian, and Iraqi nationals ranked as the top three buyer groups.
Global Uncertainties Weigh on Momentum:
Geopolitical risks, elevated costs, and financial tightening led to a cautious stance in global construction. While a slowdown in public investment constrained growth, public-backed projects in Turkey played a stabilizing role for production and employment in the sector.
Financing Access and Demand Challenges Persist:
According to the report, one of the most pressing issues for sector participants is expensive and limited financing. Elevated mortgage rates slowed private investment and prompted the postponement of new projects, leaving growth reliant on public funding.
Construction Costs Remain on an Upward Trend:
Rising material, labor, and energy prices continue to pressure the sector. Dependence on imported inputs directly exposes the industry to global geopolitical developments, fueling cost increases and reinforcing a cautious stance—particularly among private investors.
New Housing Supply Remains Constrained:
High interest rates and rising production costs keep developers cautious. Although demand remains resilient, the slowdown in new housing supply is deepening supply-demand imbalances, especially in major metropolitan areas.