The dynamics of housing affordability and housing demand analysis in Ankara

Purpose - Information about the current and future composition of the population in terms of household size and the desired housing preferences provides a good foundation for determining current and future housing needs. The policy-makers and developers can also use such knowledge as a starting point in their housing and commercial real estate investment decisions. In Turkey, urbanization and housing issues have accompanied the growth of industrialization. Within the scope of the country’s urbanization history, various instruments have been used to solve the lack of housing issues. The constructed houses should be accessible or affordable by fixed-income earners in the middle and lower socio-economic classes, who are mostly excluded. In particular, the real estate development sector has taken manageable risks by closely following the changing social and economic conditions and developing a variety of housing concepts. The purpose of this paper is to investigate the housing sector situation and affordability issues and then use time series analysis to present relationships between macroeconomic factors and housing demand in Ankara region. Design/methodology/approach - The approach uses a survey of recent housing projects cover 2016 to 2018 for housing affordability conditions. Also, the study uses the Johansen co-integration test, variance analysis and impulse-response test to explain the relationships between macroeconomic indicators and housing demand for Ankara. Findings - According to the results of time series analysis, the macroeconomic factors are affecting the demand and the number of houses sold. The research results try to find a negative or positive correlation between the numbers of houses sold and the monthly macroeconomic variables. Mortgage interest rates, usage permits, construction permits and household expenditure were found the most correlated with housing sold as a representative proxy of housing demand. This paper claims that current housing affordability is related to current housing supply and demand variables. If housing supply (as construction and usage permits) and income (as interest rates and expenditures) are at favorable levels, then housing transaction volumes increase. Research limitations/implications - This paper highlights the need to examine how to assist developers to more rapidly develop knowledge and experience to reflect the implications of change in practice. This paper is formulating a housing demand model for real estate developers, using number of house sales and other administrative statistics in Ankara region. Practical implications - If macroeconomic conditions are stable, then this encourages consumers to invest for housing whether they are affordable or not. According to the results, key factors of housing market are based on interest rates, income expectation and gaining social status. The consumers anymore not only want to buy a house to live and also want to gaining prestige. Originality/value - The paper not only shows that current price is affordable or not but also supports why price is going up although price is not affordable. The findings identify how the market is developing and adhering to a product model development theory. The paper is different from previous studies because of the use of monthly income and supply proxies together in Turkey with time series model. These results are close to the theoretical expectations and provide good indicators for policy-makers.