Turkey: Building opportunities

The Van earthquake in late October, which stunned Turkey and dominated press headlines for weeks, has also brought renewed efforts to deal with the country’s decrepit and dangerous urban housing stock.

Turkey is not unaccustomed to devastating tremors. In the past 12 years, the country has experienced seven earthquakes over 6 on the Richter scale, which have led to more than 18,500 deaths, according to estimates by the US Geological Survey. Each new tragedy brings with it recriminations over urban planning policies and implementing best practice building codes.

While the country’s building codes were changed in 1998, bringing them into line with international standards, impact on the ground has been limited, with such regulations often circumvented. In light of the events in Van, the Ministry of Environment and Urban Planning announced plans in early November for a new draft law (“the Law on Buildings and Spaces Posing a Disaster Risk”) that would mandate the demolition of all at-risk buildings across the country.

This will be a major task. Erdoğan Bayraktar, the minister for the environment and urban planning, told local press urban renewal projects associated with the law could cost as much as $400bn. “We have to reinforce those buildings that can’t resist earthquakes, no matter at what cost, so that we won’t lose our people and our cities won’t have to endure such great disasters,” he said.

Much of the investment will likely focus on Istanbul, Turkey’s biggest city. The Izmit earthquake of 1999, whose epicentre was in the Gulf of Izmit (about 50 miles south-east of Istanbul), killed more than 17,000 people, leading to much discussion on the state of city housing stock. With rapid urbanisation starting in the 1960s, the level of informal housing has leapt up. Istanbul grew at an average annual rate of 4.44% between 1970 and 1990 and 3.37% between 1990 and 2000, according to Plan Bleu.

The impact on housing stock was significant. A study by the Ministry of Reconstruction and Settlement found that by the 1980s, 70% of Istanbul’s population lived in irregular settlements. According to a 2008 OECD policy brief, the percentage of the population living in informal housing had dropped to about 50%.

This still puts the city at particular risk. According to Mustafa Erdik’s 2003 “Earthquake Risk Assessment for the Istanbul Metropolitan Area”, there is a 70% probability of an Mw7.5 earthquake in Istanbul over the next 30 years – one likely to cause 40,000-50,000 deaths and the destruction of 40,000 buildings.

The government has, therefore, a gargantuan task to rebuild and ready the city for such an eventuality. According to Bayraktar, in the new urban renewal drive’s first phase 14,000 buildings in Istanbul will be replaced. This should provide ample work for construction companies over the coming years.

“The timing of the government’s $400bn plan to make housing in Istanbul earthquake-ready is viewed as a huge opportunity for players in the sector,” said Selim Koray, the chairman of Koray Construction, a local contracting and real estate development group. “There is a great deal of confidence in the current administration, so it is expected that…this plan…will be implemented. However, [it] will take many years to complete.”

These plans come at a time when the construction sector, a champion of the Turkish economy, is experiencing a minor confidence crisis. According to the monthly sectoral confidence index released by the Turkish Statistical Institute, confidence in the sector has dropped for three consecutive months. This is largely the result of a perceived drop off in demand, falling sales prices and financing problems, according to executives’ answers.

However, construction continues to be a mainstay of Turkish economic growth. The sector grew by 13.2% in the second quarter of the year, with construction expenditure increasing by 19.7% to $14bn, according to the Association of Real Estate Investment Companies. The sector now accounts for 7.5% of Turkey’s total employment. Therefore, while contractors may be getting nervous towards the end of the year, the sector will continue to play a crucial role in Turkey’s economy and government plans for urban renewal.

The redevelopment of Istanbul has already begun. Following Law 5366 of 2005 on the preservation and renewal of historical areas, a number of projects have begun to redevelop neighbourhoods in the city. While these projects have proved controversial, largely because of the process of compensation and eviction for current tenants and owners, they will both improve the housing stock and earthquake preparedness for many neighbourhoods, and the balance books of many construction firms.

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