BAKU, Azerbaijan, August 25. Türkiye’s
construction output declined 6.0% year-on-year in June 2026,
reflecting weaker building activity alongside continued expansion
in civil engineering projects.
According to data from the Turkish Statistical Institute (TÜİK),
building construction decreased 7.5% year-on-year and 0.4% compared
with May. Specialized construction activities, including drilling,
demolition and installation works, declined 7.6% annually and 1.0%
month-on-month. At the same time, civil engineering was the only
subsector to record growth, increasing 4.5% year-on-year and 0.1%
from the previous month. Overall construction production decreased
0.5% compared with May. "When the subsectors of the construction
(based on 2021=100) were examined, construction of buildings index
decreased by 7.5%, civil engineering index increased by 4.5% and
specialised construction activities index decreased by 7.6% in June
2026, compared with same month of previous year," the statement of
TÜİK says.
The data shows a divergence between different segments of
Türkiye’s construction sector. The 12 percentage point gap between
building construction (-7.5%) and civil engineering (+4.5%)
indicates that infrastructure-related activity is providing support
while the residential segment continues to adjust to tighter
financial conditions.
Civil engineering, which includes road construction, bridges,
utilities and public works, has benefited from ongoing
infrastructure investments. Building construction and specialized
activities, meanwhile, remain influenced by the impact of the
monetary tightening cycle, which saw the Central Bank of the
Republic of Türkiye’s policy rate reach 50% in 2024, affecting
financing conditions for housing projects.
The construction data is consistent with June 2026 housing
market indicators. Calendar-adjusted new home sales declined 1.5%
year-on-year, while existing home sales decreased 8.6%. At the same
time, headline new home sales increased 23.1%, supported partly by
calendar effects. The combination of softer construction output and
mixed housing indicators suggests that Türkiye’s residential market
is undergoing a transition period rather than a broad-based
contraction.
Mortgage activity has shown signs of recovery. Mortgaged home
sales increased 72.1% year-on-year in June 2026, although the
comparison base remains low following limited mortgage activity in
2024. The impact of improving financing conditions on construction
activity is expected to appear with a time lag, as building
permits, land purchases and construction starts typically precede
completed projects by one to two years.
Trend’s
calculations show that the current monetary easing cycle — with the
policy rate declining from 50% toward approximately 35% by mid-2026
— could begin supporting construction production indicators from
late 2026 or early 2027 as financing conditions gradually
improve.
The decline in specialized construction activity also reflects
changes in the structure of earthquake-related reconstruction work.
Following the February 2023 earthquake affecting 11 provinces,
activities such as demolition, foundation works and structural
reinforcement remained elevated through 2023–2025. The 7.6% annual
decline in June suggests that the reconstruction process is moving
from the most intensive emergency-related phase toward more
standard building activity.
Additional context comes from TÜİK industrial production data on
construction materials. In June 2026, construction materials output
increased 9.4% year-on-year, while construction production declined
6.0%.
This divergence suggests that demand for construction inputs
remains supported despite weaker residential construction activity.
Trend’s calculations
indicate that the difference between materials production growth
(+9.4%) and construction output decline (-6.0%) represents a 15.4
percentage point gap, which can be explained by several factors,
including stronger demand from infrastructure projects, export
activity and preparation for future construction activity.
The increase in construction materials production is also
consistent with the 14.8% rise in industrial export delivery
values, indicating that part of the additional output may be linked
to external demand.
In Trend’s
assessment, Türkiye’s construction sector is currently experiencing
a rebalancing phase: infrastructure projects and improving
financing conditions provide support, while residential
construction adjusts after a period of high interest rates. The
divergence between segments is likely to narrow as lower financing
costs gradually translate into new housing activity.
