According to TÜİK Data, Construction Costs Approached 30 Percent Annually in May

The latest data published by the Türkiye İstatistik Kurumu (TÜİK) clearly reveals that cost increases in the construction sector show no signs of slowing down. According to May data, the general construction cost index increased by 1.87 percent compared to the previous month. On an annual basis, this rate reached 29.84 percent, which is a highly remarkable level. This continuous increase in both materials and labor, which are the fundamental components of the sector, continues to weigh heavily on the cost burden of contractor companies. Particularly, the high annual rates reveal how deeply inflationary pressure affects the construction sector.

When examining the details of the cost increase, the rise in labor expenses surpassing material prices stood out as one of the most notable details. On a monthly basis, the material price index increased by 1.77 percent, while the increase in the labor cost index was recorded at 2.04 percent. Compared to the same month of the previous year, material costs experienced a jump of 28.62 percent. The annual increase in labor costs reached a highly elevated level of 32 percent. These data tangibly confirm the impact of supply and demand imbalances in the labor market, as well as factors such as the minimum wage, on sector costs.

The upward trend continues at full speed in the building construction cost index, which forms the basis of residential and commercial building projects. In May, building construction costs rose by 1.96 percent on a monthly basis. On an annual basis, the increase in building construction costs was realized as 28.56 percent. Rising labor expenses, along with the increase in the prices of basic structural materials used in the construction process, are directly reflected in the total budgets of residential and commercial projects. This situation makes it mandatory to continuously revise budgets during the planning stages of new building projects.

In mega projects such as infrastructure, roads, and bridges, which are included in the non-building structures group, the cost increase reached much more dramatic levels. In this group, the cost index recorded an increase of 1.60 percent in just one month. However, on an annual basis, the cost increase of non-building structures reached a highly elevated figure of 34.06 percent. Thus, cost inflation in infrastructure projects followed a trajectory significantly above the general construction cost index. This situation creates a picture that could lead to supplementary budgets or cost restructuring in large infrastructure investments by the government and the private sector.

Sector representatives and economic experts point out the potential impacts of these announced figures on the Turkish economy. Authorities state that increasing expenses directly affect the budgets of new expropriation and infrastructure projects, which could constrain investment appetite. Furthermore, experts emphasize that this persistent (permanent) rise in construction costs will be directly reflected in residential production costs and will ultimately sustain inflationary pressure on housing sales prices and the rental market. The TÜİK's May report confirms that the increase in the labor line item has become a critically important cost factor for the sector, and it seems unlikely that this trend will change in the short term.