Construction Turns Positive, Istanbul Rents Outpace Prices — October 2026 Bulletin

İTOSAM — Weekly Economic Bulletin | 16 October 2026

Translation and analysis of the Istanbul Chamber of Commerce economic bulletin

İTO Center for Strategic Studies — period 12 to 16 October 2026

Covered: the IMF World Economic Outlook, the OECD report on industrial SMEs, balance of payments statistics, household consumption expenditure, turnover indices, sectoral production indices, the commercial sales volume index, the house price index and the new-tenant rent index, house and commercial unit sales statistics, and payroll employment statistics

In terms of trend reversal, this is the most important bulletin in the series. After seven months of negative data, construction output turned positive year on year for the first time, and the current account posted a monthly surplus. At the same time two new indices were published that bear directly on your work: the new-tenant rent index and the regional breakdown of household spending. But the picture is not uniform — real estate activities got worse, and real house prices are still negative.

1. IMF: World Economic Outlook — October 2026

"The International Monetary Fund expects global inflation to rise"

The report says that the war in the Middle East and trade tensions have increased the pressure on the world economy, but that despite these developments, economic activity in the first half of 2026 came in above expectations. Among the report's notable findings is the support that artificial intelligence investment gives to the technology cycle, and its share in economic demand.

The Fund forecasts world economic growth of 3.1% for 2026 and 3.4% for 2027. Global inflation — mainly because of pressure from temporary increases in energy and food prices — is expected to rise to 4.7% in 2026 and to fall to 4.1% in 2027.

In the country forecasts, Turkey's economic growth is estimated at 2.7% in 2026 and 3.6% in 2027. In its July forecasts the Fund had projected Turkish growth of 2.9% and 3.6% respectively for these two years; in other words, the 2026 forecast was revised down and the 2027 forecast was unchanged. Turkey's average inflation is expected to be 31.2% in 2026 and 26.5% in 2027.

Analytical reading: a downward revision of 0.2 points is small, but its direction matters — the Fund has lowered Turkey's growth while it judges global activity to be stronger than expected. In other words, Turkey's slowdown is home-grown, not imported.

A second point for multi-year planning: the Fund still sees Turkish inflation at 26.5% in 2027. Any contract or feasibility study built on the assumption of single-digit inflation, or even inflation below 20% by next year, is not consistent with this forecast.

2. OECD: Preparing industrial SMEs for the future

"SMEs provide 57% of industrial employment"

The report by the Organisation for Economic Co-operation and Development (OECD) on small and medium-sized enterprises (SMEs) in manufacturing examines the digitalisation of these firms. The study, which focuses on the automotive, electronics (semiconductor) and machinery sectors, shows that the transformation creates different needs in each sector.

According to the report, in 2023 SMEs accounted on average for about 41% of value added and 57% of employment in the manufacturing industries of OECD countries. But SMEs' average share of total turnover in the machinery and equipment industry has slipped from about 50% in 2010 to 48% in 2015 and 44% in 2022.

In the automotive sector, the spread of electric and autonomous vehicles requires SMEs that produce for internal combustion engines to adapt their skills and production technologies to the new needs. In this process, new business opportunities emerge in software and communication technology, and support for the transition through investment financing, technical advice and staff training comes to the fore.

In semiconductors, the need for capital and high expertise makes market entry difficult, but there are opportunities for firms that design chips without owning production facilities. In machinery, demand for smart, connected and energy-efficient equipment is rising, and technologies such as 3D printing give an advantage to firms that produce in small batches. To adapt to this transformation, the report highlights developing digital skills, expanding technical advisory services and making it easier for SMEs to take part in data-sharing systems.

A pattern that applies to Turkey too: the fall in SMEs' share from 50% to 44% in twelve years means that scale is becoming more important, and the small firm is being left behind in capital-intensive industries. This is consistent with the structural picture of Turkey we saw in the 28 August bulletin: 54.4% of industrial firms in low technology and only 0.8% in high technology.

A usable point: the routes the report considers "low-barrier" — fabless design, small-batch production with 3D printing, software services and technical consulting — are all capital-light models. For a firm that intends to enter manufacturing, these are the logical entry points, not a heavy production line.

3. Balance of payments statistics — August 2026

"The annual current account deficit reached USD 42.1 billion"

According to the Central Bank of Turkey's balance of payments report, the current account posted a surplus of USD 4.1 billion in August 2026. Excluding gold and energy, the current account showed a surplus of USD 8.2 billion, and the 12-month current account deficit reached USD 42.1 billion.

The trade deficit as defined in the balance of payments was USD 3.7 billion in August, with goods exports of USD 23.3 billion and goods imports of USD 27.1 billion. The services balance, driven by travel and transport, recorded net inflows of USD 9.7 billion.

On the financing side, portfolio investment recorded a net outflow of USD 1.0 billion, while banks and other sectors used net credit of USD 2.2 billion and USD 1.2 billion respectively. Official reserves saw a net increase of USD 7.1 billion, and net errors and omissions were an inflow of USD 4.5 billion.

Compared with the same month a year earlier, the monthly current account surplus slipped from USD 4.6 billion to USD 4.1 billion, while the 12-month current account deficit grew from USD 23.8 billion to USD 42.1 billion.

The good news of the month: a monthly surplus of USD 4.1 billion, and USD 8.2 billion excluding gold and energy — meaning that Turkey's export and tourism capacity in the peak season fully covers the deficit. The USD 7.1 billion rise in official reserves in a single month is an answer to the reserve-adequacy concern the International Monetary Fund raised in the 7 August bulletin (78.7%, below the recommended level).

But the cumulative trend has worsened: the 12-month deficit has gone from USD 38.9 billion in the June data to USD 42.1 billion — in other words, it widened by USD 3.2 billion in two months, and it is almost double the level of a year earlier (23.8 → 42.1). The August surplus is seasonal (summer tourism); the twelve-month picture is the structural reality.

A positive side note: 12-month net errors and omissions improved from minus 20.4 to minus 17.5 billion dollars — unrecorded capital outflows have shrunk.

4. Household consumption expenditure — 2025

"Istanbul leads household consumption expenditure with 25.6%"

According to the results of the household consumption expenditure survey, broken down by NUTS-1 regions, 25.6% of Turkey's total household consumption expenditure was recorded in the Istanbul region (TR1). The Aegean region (TR3) came second with 14.5% and the Mediterranean (TR6) third with 12.6%. The lowest share, 1.4%, went to Northeast Anatolia (TRA).

The Istanbul region had the highest share in every type of expenditure: 38.3% of the country's spending on education services, 32.2% of spending on restaurants and accommodation services, 28.4% of spending on housing and rent, and 27.3% of spending on recreation, sport and culture took place in this region.

Looking at the distribution within regions, in every NUTS-1 region the bulk of household consumption expenditure went on housing and rent, transport, and food and non-alcoholic beverages. The region that allocates the largest share to housing and rent is Istanbul, with 29.6%, and the smallest share, 22.1%, belongs to Northeast Anatolia.

Two numbers to use in presentations: Istanbul makes up 25.6% of the whole country's consumption but 28.4% of its spending on housing and rent — in other words, Istanbul's weight in the housing market is greater than its general economic weight. And the Istanbul household spends 29.6% of its budget on housing, the highest ratio in Turkey and 7.5 points above the lowest region.

Together, these two numbers make a strong case for focusing on Istanbul in any property feasibility study — and at the same time they explain why price sensitivity is high in this city: housing's share of the household budget is already at the ceiling.

5. Turnover indices — August 2026

The total turnover index, which covers industry, construction, trade and services, rose 31.8% in August from a year earlier. By sector, services grew 33.6%, industry 32.6%, trade 32.5% and construction 19.2%.

In monthly changes, industry grew 2.2%, trade 4.3% and services 2.6%, while the construction turnover index fell 3.7% from the previous month.

A strange divergence in construction: in the same month, construction output grew 4.0% month on month, but its turnover fell 3.7%. More work, less revenue.

On an annual basis too, construction, with 19.2% nominal growth, is the only sector clearly below 31.5 percent inflation — meaning a real contraction in revenue of about 9.4%, while services, industry and trade are all close to or slightly above inflation.

Practical meaning: the return of work volume in construction has not been matched by a return of prices. Price competition is fierce, and contractors are sacrificing margin to win work. In this season's negotiations this favours the client — but if you are on the contractor's side, accepting work below cost in this market is the most dangerous decision.

6. Sectoral production indices — August 2026

"Construction output stood out with a monthly rise"

Industrial production fell 1.0% month on month and slipped 1.9% year on year. Construction output recorded 4.0% month-on-month and 2.3% year-on-year growth, and services output rose 0.2% month on month and 2.3% year on year. So among the three main indices, the only annual decline was in industry.

The turn is confirmed. The path of construction output over the last three bulletins: −6.0% (June) → −4.7% (July) → +2.3% (August). This is the first positive annual figure in the whole series, and it comes with 4.0 percent monthly growth — the strongest monthly growth recorded.

The 18 September analysis said: "The first monthly growth for the sector as a whole may be a sign that the bottom is near — but one month of data is not enough." The second month has arrived and confirmed the direction. At the same time, contractors' orders on the books had also recovered from 78.9 to 80.4 (25 September bulletin). Three independent indicators, one direction.

In industry, manufacturing output slipped 1.6% month on month and 2.5% year on year. The mining and quarrying index grew 4.1% month on month and 1.7% year on year, and the electricity, gas, steam and air-conditioning index 3.3% month on month and 1.3% year on year. Among the sub-groups, on an annual basis, energy output rose 4.4%, while intermediate goods output fell 0.8% and durable consumer goods 1.5%.

Construction: all three components improved

Building construction output rose 4.5% month on month and slipped only 0.9% year on year. Civil engineering works grew 2.2% month on month and made a strong 21.8% jump year on year. Specialised construction activities showed a 3.8% monthly and 0.1% annual increase.

Improvement in all three components, and a sharp one: building construction from −8.0% to −0.9% (a 7.1-point improvement in one month), specialised activities from −4.9% to +0.1% (turned positive), and infrastructure from +14.0% to +21.8%.

Two months ago we wrote that "private construction demand has dried up and the public client is holding the market up". This month, private construction has also come back to roughly zero, and specialised construction activities — the most direct indicator of work for specialist contractors — have turned positive.

Practical implication: if a project is waiting in the queue, its start window is now open. But as the turnover data showed, the return of volume is not matched by a return of prices — hiring a contractor will be cheaper than six months from now, but not without competition.

Services: real estate got worse

In services, information and communication was the strongest sub-sector at 9.9%. Accommodation and food services rose 2.0%, transport and storage 1.8%, administrative and support services 1.2%, and professional, scientific and technical activities 1.1%. By contrast, real estate activities slipped 7.5%.

The gap to watch: construction +2.3% but real estate activities −7.5% — and worse than the previous month (−5.2%). In other words, building has come back, dealing has not. For PERGAS, which does both project management and property brokerage, this is an important distinction: the delivery side of the business is improving, while the brokerage side is still contracting.

Real estate turnover also grew only 0.4% month on month — practically stagnant.

7. Commercial sales volume index — August 2026

The commercial sales volume index rose 0.2% in August from the previous month and 0.6% from a year earlier. Among the sub-items, compared with the previous month, the sales volume of wholesale and retail trade and repair of motor vehicles and motorcycles fell 1.0% and the sales volume of wholesale trade 0.2%, while retail sales volume rose 1.4%.

Back to growth: this index was at −4.5% year on year in the June data; now it is +0.6%. Because commercial sales volume is measured directly in real terms (not nominal), this is one of the cleanest signs of domestic demand stabilising in this series.

8. House price index and new-tenant rent index — September 2026

"A 22.3 percent annual rise in house prices"

The house price index (KFE) rose 1.2% in September from the previous month and 22.3% in nominal terms from a year earlier. According to the real index adjusted by consumer inflation, house prices fell 5.7% year on year. At provincial level, the annual nominal increase was 26.8% in Istanbul, 22.0% in Ankara and 21.0% in Izmir. Monthly changes were 2.0% in Istanbul, 0.1% in Ankara and 1.0% in Izmir.

New-tenant rent index (YKKE)

The new-tenant rent index rose 2.1% in September from the previous month and 26.6% in nominal terms from a year earlier. In real terms, the index fell only 2.4% year on year. At provincial level, the annual nominal increase in new-tenant rents was 35.5% in Istanbul, 25.1% in Ankara and 23.7% in Izmir. Monthly changes were 3.5% in Istanbul, 0.6% in Ankara and 1.1% in Izmir.

The most important finding in this bulletin for PERGAS. In Istanbul, new-tenant rents have risen 35.5% while house prices rose 26.8% — a gap of 8.7 points in favour of rents. And on a monthly basis, 3.5% against 2.0%.

Two direct conclusions:

1. Rental yields are widening. When rents grow faster than prices, the rent-to-price ratio rises — in other words, the payback period gets shorter. This is the opposite of what happened in 2022 to 2024.

2. The sales argument has to change. Price growth in Istanbul is negative in real terms (about −2.3% real), but Istanbul rents are the only property asset with a positive real return (about +4.4% real). For investor clients and for citizenship-by-investment cases, the rental income stream is the defensible argument today, not price appreciation.

Note: YKKE measures only new-tenant contracts, not renewals of existing contracts, which have a legal cap. So this number is the free-market rent rate — exactly what is useful when marketing a vacant unit.

9. House and commercial unit sales statistics — September 2026

Total house sales across Turkey fell 9.3% in September 2026 from a year earlier, to 142,390 units. Over the same period mortgaged sales rose 5.1% to 23,397 units, and other sales fell 11.6% to 118,993 units. Mortgaged sales made up 16.4% of the total and other sales 83.6%.

Sales of new-build homes rose 3.9% year on year in September to 51,519 units, while second-hand home sales fell 15.3% to 90,871 units. New-build accounted for 36.2% of the total and second-hand for 63.8%. House sales to foreign nationals grew 9.9% year on year to 2,167 units; their share of total sales was 1.5%.

In Istanbul, 22,212 homes were sold in September: 28.5% new-build and 71.5% second-hand. Mortgaged sales made up 20.8% of the Istanbul total and other sales 79.2%.

Three months of improvement in a row. The annual fall in total house sales: −17.0% → −14.7% → −9.3%. And new-build homes turned positive for the first time: −8.6% → −4.5% → +3.9%.

The new-build advantage we have tracked since the start of this series has now reached a positive number, while second-hand is still at −15.3% — a gap of 19 points. For any sales project, this difference is decisive.

A third point: sales to foreign nationals +9.9% — the first meaningful growth in this series (it was 1.9% before). The share is still 1.5%, but the direction has changed.

But the financing mix is shifting into reverse: growth in mortgaged sales has slowed from 23.7% (July) to 7.2% (August) and 5.1% (September), and their share of the total has dropped from 19.3% to 16.4%. The loan-driven engine identified in the 14 August bulletin is losing momentum — while the market as a whole is improving. In other words, the recent improvement is coming from cash buyers, not from loans.

Commercial units

Across the country, 17,345 commercial units were sold in September. Sales of new-build commercial units rose 13.2% from a year earlier to 5,789 units, and second-hand sales fell 10.5% to 11,556 units. Mortgaged sales grew 37.7% to 683 units, and other sales fell 5.0%. In Istanbul, 2,192 commercial units were sold: 23.2% new-build and 76.8% second-hand, with a mortgaged share of 5.6%.

Commercial units follow the same pattern as housing: new-build +13.2% against second-hand −10.5%. And mortgaged commercial sales over nine months were +61.8% — the strongest financing growth in the whole property market. Given that mortgages account for only 5.6 percent in Istanbul, this growth is mainly outside Istanbul. For new-build offices and commercial units, demand is clearer than for housing.

10. Payroll employment statistics — August 2026

The total number of payroll employees in industry, construction and trade-services rose 2.0% in August from a year earlier, to 16,409,588. By sector, industry fell 1.0%, while construction rose 3.4% and trade-services 3.3%. Industrial job losses over the past year came to 50,777.

On a monthly basis, total payroll employment was unchanged; trade-services rose 0.2%, industry fell 0.2%, and construction was unchanged.

A column error in the original bulletin: in the payroll employment table, the column headings ("August 2026" and "August 2025") have been swapped. The first column actually holds the 2025 data. This can be seen with three independent tests: the bulletin text gives total 2026 payroll employment as 16,409,588 (the second column), it puts industrial job losses at 50,777 (4,886,434 minus 4,835,657), and every percentage change only works out under this reading. The columns have been corrected in the table above. This is the second time in this series that such an error has appeared in the bulletin's tables (the first: the commercial unit sales table in the 18 September bulletin).

The workforce adjustment has stabilised: construction employment growth has gone from 7.1% (June) to 3.5% (July) and 3.4% (August) — in other words, the sharp adjustment has happened and employment has now stabilised at a new level. Industrial job losses have also fallen, from 71,737 the previous month to 50,777. Both are signs that the worst of the adjustment is behind us.

Interestingly, real estate employment grew +6.0%, while the same sector's output is down 7.5% — the same imbalance we saw in construction last year, this time in real estate. If the pattern repeats, job cuts in this sector are likely in the coming months.

11. Analytical summary

a) The construction cycle has turned — with three independent confirmations

Annual output +2.3% (the first positive figure), monthly output +4.0% (the strongest in this series), and all three components improved: building construction from −8.0% to −0.9%, specialised activities from −4.9% to +0.1%, infrastructure from +14% to +21.8%. In addition, contractors' orders on the books (80.4) and new-build home sales (+3.9%) have also turned.

b) But revenue has not come back

Construction turnover grew 19.2% year on year in nominal terms — about a 9% real contraction — and was down 3.7% month on month in the same month that output grew 4.0%. More work, less revenue. Price competition is fierce.

c) Rent, the only property asset with a positive real return

Istanbul new-tenant rents +35.5% nominal against house prices +26.8% — a gap of 8.7 points. In real terms, Istanbul rents are about +4.4% and house prices about −2.3%. Rental yields are widening.

d) Property dealing has not come back yet

Real estate activities −7.5% — worse than the previous month (−5.2%) — and their turnover practically stagnant (+0.4% month on month). Building has come back, brokerage has not.

e) Practical implications for PERGAS

• Rewrite the sales argument to investors. The YKKE data makes it possible to rely on widening rental yields instead of promising price growth (which is negative in real terms) — with an official central bank number: 35.5% annual rent growth in Istanbul. For citizenship-by-investment cases, this argument is both more defensible and less likely to lead to a dispute later.

• Focus on new-build, now with a positive number. New-build homes +3.9% against second-hand −15.3%; new-build commercial units +13.2% against second-hand −10.5%. In both markets the gap is close to 20 points.

• The project start window is open. Output has come back but prices have not — meaning you can sign contractors and a delivery team today for less than six months from now. If you are on the contractor's side, the reverse applies: accepting work below cost in a market whose volume is coming back is an expensive mistake.

• Multi-year planning with 26.5% inflation. That is the IMF forecast for 2027 — any feasibility study that assumes lower inflation is an overestimate.

• Istanbul in presentations: 25.6% of national consumption, 28.4% of national housing expenditure, and 29.6% of the Istanbul household budget spent on housing — the highest ratio in Turkey.

• What to watch next month: will construction output record a second positive month? Will the rent-price gap in Istanbul persist? Will real estate activities recover from −7.5%?

This document is a translation and analysis of the weekly economic bulletin of the İTO Center for Strategic Studies (İTOSAM) dated 16 October 2026. Data is drawn from the sources cited in the bulletin (IMF, OECD, TÜİK and TCMB). The sections headed "Reading", "Note", "Warning", "Summary" and "Implications" are added commentary and are not part of the original bulletin text. The real figures for house prices and rents by city, computed on the basis of September consumer inflation (29.73 percent), and the calculations of the real contraction in turnover, computed on the basis of August inflation (31.5 percent), are added commentary; the national real figures (−5.7% and −2.4%) are official and come from the bulletin itself. References to earlier months' data are based on the bulletins of 7 August, 14 August, 28 August, 4 September, 18 September and 25 September 2026. A column error in the original bulletin (the payroll employment table) is flagged and corrected in the text. In the Persian edition, months are given with Persian names for readability: Khordad ≈ June, Tir ≈ July, Mordad ≈ August, Shahrivar ≈ September.