Construction sector in 2009: Only the fittest will survive
Posted by meb at January 2nd, 2009
As Turkish construction companies seek ways to stay afloat under the strain of the financial crisis, which continues to batter global markets, the weakest links will not escape elimination in 2009.
Since the most destructive effects of the crisis are hitting the construction sector, Turkish companies are also feeling the heat. Having seen a drop of 4.3 percent in the third quarter of 2008, the sector shrank by 1.1 percent in the first nine-month period of the year. Four years ago no construction company would have imagined such a downfall in the sector. Beginning in 2004, the construction sector entered a new era. Due to economic stability, real estate interest rates fell dramatically and the sector experienced in its heyday. Numerous new mass building projects were introduced, people flocked to the sales offices of construction companies to buy apartments, paying large sums of money. This trend grew, turning big cities into giant construction sites. The breathtaking increase in demand encouraged many companies that had never worked in construction before to enter the construction sector. However, it seems companies that entered the sector without enough capital and experience will have to leave the stage soon.
The first hit came in May 2006, when interest rates reached 2 percent and sales slumped. Problems have mounted since then and reached a peak in 2008. Now, due to fluctuation in the markets, new projects are on the verge of being totally cancelled. Many authorities agree that 2008 was a year of losses for the Turkish construction sector.
Many suggest that the shrinkage in the sector will continue in 2009 because of uncertainty in the markets. Banks are reluctant to extend loans, a situation that will trigger an increase in interest rates. Companies will feel compelled to introduce promotions to attract more customers; however, no significant decline in prices is expected.
It has long been said that a decline in demand would lead some companies to go bankrupt. Many companies said they had difficulties paying their debts. Bekir Cumurcu, president of the Real Estate Investing Partners Association (GYODER), recently said some companies would not be able to survive through the end of 2009 due to the crisis. Additionally, those hoping for a recovery in the market in 2009 may have to wait longer.
source: Today’s Zaman
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