Examining the Presence of Balloons in Turkey's House Prices

Abstract

Financial bubbles have a significant effect on economic indicators. Bubbles in the housing market may herald the existence of financial crises, especially those arising from the housing market. In this study, it was aimed to test the existence of bubbles in housing price formations by considering the housing price index of Turkey in general and the housing price index of 26 sub- provinces/regions, including Turkey's three big cities. For this purpose, the existence of bubbles in housing prices were examined using the monthly frequency data of 27 housing price indexes for the 2010M1 – 2022M3 periods, with the methods of the Sup-Augmented Dickey Fuller and Generalized Sup-Augmented Dickey Fuller methods and then the periods of the bubbles determined form each province/region were expressed. In the findings obtained, the presence of undeflated balloons was determined in Turkey in general and in all 26 sub-provinces/regions. Considering the economic risks that balloons indicate, it is clear that necesserity of constantly controlled with regulations both of the housing market and the financial markets associated with the housing market. It is thought that the study will contribute to the literature in terms of handling the period including the COVID-19 pandemic process, using real housing prices, and comprehensively examining the existence of bubbles for both Turkey in general and all sub-regions of Turkey.

The Role of Speculative Demand in Housing Price Changes in Turkey

“…These studies proceed to the estimation stage independently of a theoretical model (see, for instance, Alp, 2019;Karadas-Salihoglu, 2020;Yildirim et al, 2021;Cetin, 2021;Sari, 2022;Ozcan, 2023;Sanli-Peker, 2023;Bakirci-Akgemci, 2023). It should be noted that studies investigating the existence of bubbles in the housing market have recently increased (see, for instance, Solak-Kabadayi, 2016;Cagli, 2019;Coskun et al, 2020;Gokce-Guler, 2020;Akkus, 2021;Coskun-Pitros, 2022;Kayacan, 2022;Vergili, 2023;Gunduz et al, 2023). The current study differs from previous ones conducted in Turkey in terms of its theoretical background and estimation methodology.…”