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price of cement is around €35/tonnes. “This is well below the prices in other countries.” Ozdemir noted that as producers slashed prices they ran into problems repaying their debts. The capacity utilization rate across the industry retreated to 54% last year. In the face of weak domestic market, producers turned to foreign markets to compensate for their loses. Thus, local cement companies’ exports increased by 38% y/y to 5.3mn tonnes while clinker shipments soared 116% y/y to 6mn tonnes in the first half of 2019. Companies’ export revenues jumped 46% y/y to $444mn. The industry’s export revenues stood at $614mn in the whole of 2017.
Turkish construction companies inked $20bn-$21bn worth of contracts abroad last year and expect the figure to remain flat at around $20bn in 2019, Mithat Yenigun, head of the Turkish Contractors' Association, told state- run news service Anadolu. Turkish contractors are currently operating in 123 countries and have completed some 3,800 projects worth $38bn since 1972, he noted. Back in the early 2000s, Turkey's contractors carried out around $4- 5bn worth of projects annually in foreign countries. The years of 2012 and 2013, however, were the golden years for local contractors when they made as much as $30bn from projects they undertook abroad. "We're in contact with Korean, Japanese, and Chinese firms on collaborations, we're expecting new moves in this area,” he also said. It makes perfect business sense for Turkish companies to seek new markets to explore abroad at a time when the local construction industry is shrinking fast.
The construction sector contracted by 11% y/y in the first quarter of this year, after declining 5.6% y/y and 8.7% y/y, in the third and final quarters of 2018. In the whole of 2018, the sector’s output fell 1.9% compared to the previous year.
Latest data shows that home sales in Turkey declined by 49% on an annual basis to 61,355 units in June, extending the contraction in the market to a sixth consecutive month. Istanbul, the country’s richest city, saw a 51% decline in home sales in the month from a year ago to 10,000 units while the housing market in the capital Ankara contracted 55%m with only 5,000 units sold. In Izmir, the country’s third largest city, sales plunged 52% y/y to 3,300 units.
Mortgage-financed sales across Turkey nosedived 85% on an annual basis to 7,300 units, national statistics institute TUIK said. Under pressure from President Recep Tayyip Erdogan, the Central Bank of Turkey is expected to slash its interest rates by as much as 250 bps at its next rate-setting meeting, scheduled for July 25. Investors are already pricing in the rate cut. It may help to boost home sales by cutting the costs on housing loans. But a rate cut may not be enough to revive the ailing housing sector as the Turkish economy faces a number of uncertainties and risks. Any rate cut larger than the expected 200-250 bps may cause turmoil.
TUIK data also showed that home sales declined 22% y/y to 506,000 units in the first half of 2019. On the upside, property sales to foreign nationals soared nu as much as 69% to a total of 20,000 units in January-June. Iraqis took the lead with 3,400 property purchases, followed by Iranians (2,202 units) Russians (1,264) and Germans (745).
9.1.5 Retail sector news
More than 4,000 store spaces remain vacant in Turkey’s 400-plus shopping centres with high costs and weak consumer demand hitting the country’s retail industry. “The situation is more or less the same for the high and main street retailers. If the government takes action to cut withholding and VAT taxes in rental contracts for retailers this would serve as a great boon to the retail sector,” said Sinan Oncel, head of the United Brands Association (BMD). However, the government may not be inclined to heed the retailers’ demand for tax relief since the central government budget has been producing large deficits because tax collection is declining—both because of the
62 TURKEY Country Report August 2019 www.intellinews.com