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.
