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Industry Association:  Cash flow declines further in construction

The financial squeeze experienced in the construction sector continues to have an impact in the first two months of the…

Industry Association:  Cash flow declines further in construction

The financial squeeze experienced in the construction sector continues to have an impact in the first two months of the new year. With sales falling significantly,  cash flow came to a halt, reports a monthly survey by supplier association IMSAD (Construction materials industry association).

 

The report adds that  “Important players in the sector are in search of solutions”. According to the latest report prepared by İMSAD, the financial bottleneck which  began in the sector in the second half of 2018 failed to abate in 2019. Significant decreases were recorded in 15 sub-sectors providing inputs to construction, home building and interior decoration.

 

Further details from IMSAD report

 

The financial tightness experienced in the construction sector continues to show its effect in the first two months of the new year. With a significant drop in sales, cash flow is at a standstill. According to the latest report prepared by IMSAD, the financial tightness experienced in the sector continued in the first two months of 2019 and led to significant decline in 15 sub-sectors. The fact that the housing sales displayed a negative trend in the first month of the new year after the  slump of the last year reveals the extent of the danger once again.

High housing loan rates, the deterioration in the supply-demand balance and the continued rise in housing prices were the main reasons for the decline in the  sales figures. “Monthly developments in Turkey construction sector”, drafted by the umbrella organization of the Association of Construction Material Producers (MSAD), suggests that alarm bells ringing in the sector once again, despite several government-led campaigns to provide affordable home loans and industry-wide price discounts. According to the report; The financial tightness in the construction sector continued in the first two months of 2019 and led to significant decline in the 15 sub-sectors.

In 2018, the average industrial production of construction materials decreased by 2 percent compared to 2017, while new jobs decreases to the lowest level since 2010. The report also highlighted the fact that the construction sector and the markets were experiencing demand and financing problems and didn’t expect a visible improvement in new construction orders. Contractors continue to see the financial problems created by these financial constraints as the most important obstacle to activity in the construction sector. It is foreseen that a permanent recovery in the construction sector will be delayed until the financial difficulties are resolved.

 

Number of permits decreased by half

 

Due to the contraction in demand in the construction sector, the increasing costs and the difficulties experienced in the contracting sector,  construction permits for new structures experienced a significant decline, particularly on the residential side. While the number of building permits for housing was 1.37 million in 2017, it has been reduced to 640 thousand apartments in 2018. The decline in construction permits also led to the conclusion  that new starts in construction and housing sector would be weak in 2019, further depressing growth and jobs.

 

 

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