The relationship between housing prices and inflation rate in Turkey

Abstract

Purpose Human beings need shelter as the beginning of their existence. Same holds true for people who live in Turkey as it is a cultural and traditional reason to be the host and endeavor to buy a home even if one has to pay the debt for years. Another factor that is important for individuals and even for countries is the inflation rate. In this context, the purpose of this study is to investigate whether the 26 regions of Turkey are affected by the inflationary pressure, specifically in the housing price index (HPI). Design/methodology/approach For this purpose, data from 2010:01 to 2019:01 and the consumer price index (CPI), as well as HPI have been used. The causal relationship between the variables is analyzed by Konya Causality (2006) test. Findings The key results suggest that HPI causes inflationary pressures in some regions. Research limitations/implications The study has some limitations in terms of data set and scope. These are as follows: although there are many variables affecting housing prices, this study aims to investigate the causal link between inflation and housing prices. In addition, only the CPI and HPI variables were provided on a monthly basis in the 2010-2019 period for 26 regions due to the aim of making regional propositions in the investigation of this relationship. For these reasons, different macroeconomic variables could not be studied. Originality/value This study makes the following contribution to the literature. While the majority of existing literature investigates the relationship between housing prices and inflation from an empirical perspective for country, very few studies have been for the sub-regions and also these studies have focused on only some sub-regions. In other words, in the literature review, a study has observed that Turkey has to examine the relationship between the housing price and inflation variables for all sub-regions in particular. To overcome this deficiency in the literature, this study aims to investigate the relationship between housing price and inflation for 26 regions.

Impact of Macroeconomic Variables on Housing Prices in Saudi Arabia: A VAR Approach

“…The change of CPI is more reflected in the change in housing prices index since the p-value of CPI is 0.0057 which is less than 5%. These findings are similar to the finding of Korkmaz, O. (2020).…”

A fresh look at the inflation-hedging attributes of residential property investments in emerging markets: evidence from Nigeria

“…Analysing monthly data from 1953 to 2016, the study affirmed long-term cointegration between housing assets and inflation at lower quantiles, indicating that housing provides inflation hedging capability at lower quantiles. The more recent study of Korkmaz (2020) employed the Konya causality technique to analyse the linkage between residential assets and inflation in Turkey. Employing quarterly data on 26 regions in Turkey over the period 2010-2019, the findings showed regional variations in the link between residential property and inflation.…”

“…To underscore the economic and social significance of housing, studies such as Galal and Razzaz (2001), Hong et al (2013), Christou et al (2018) amongst others affirmed that investment in housing is the largest singular investment held by nearly all households in most countries. Thus, the consumption and investment decisions of households are significantly influenced by the dynamics of the housing markets, with severe implications for macro-economic stability (Korkmaz, 2020).…”

“…However, empirical evidence on the link between residential property and inflation has yielded mixed results, indicating a lack of consensus. While several studies such as Rubens et al (1989), Zhou and Clements (2010) , Aqshia and Mashia (2018), Korkmaz (2020), etc. provided evidence of the positive link between residential real estate and inflation, others which include Linnerman and Gyourko (1988), Chu and Sing (2004), Christou et al (2018) among others established that real estate is negatively linked with inflation.…”

Turkish Housing Market Dynamics: An Estimated DSGE Model

“…As a result, Turkey’s mortgage loan interest rates are at very low levels leading to an increase in the amount of mortgage loans 1 and a strong domestic demand for housing (Coşkun et al, 2020). Furthermore, the presence of more than 3 million Syrian refugees since March 2011 has contributed to a significant rise in house prices in Turkey (Korkmaz, 2020). In addition, it is suggested that housing has been considered an investment tool in recent years (Alp & Seven, 2019).…”