The Effects of Changes in Exchange Rate on Foreign Housi̇ng Demand: In Turkey

Abstract

The aim of our study is to investigate the effect of changes in real exchange rate on foreign housing demand. For this purpose, the effect of the exchange rate on house sales to foreigners has been examined. In this study, since the figures of house sales to foreigners by nationality were published as of 2015, monthly house sales data for foreigners covering the period of 2015-2021 were used. In this direction, structural break unit root and cointegration tests were used. In the model in which time series analysis is used, the dependent variable is house sales to foreigners, and the real effective exchange rate and house price index figures are used as independent variables. According to the Gregory-Hansen cointegration test results, it is seen that there is a long-term cointegration relationship between house sales to foreigners, real effective exchange rate and house price index. The analysis of the long-term relationship between the variables with a cointegration relationship was investigated with the FMOLS coefficient method, in which the structural breaks were included in the analysis as a dummy variable, and it was concluded that a 1% decrease in the real effective exchange rate (depreciation of the TL) increased the foreign house sales by 3.43%. The coefficient of the housing price index variable was statistically insignificant.