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Demand-side factors of housing price increases in Turkey: Blanchard-Quah SVAR model

Author

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  • Hulya Deniz Karakoyun,
  • Nurtac Yildirim

Abstract

A bubble in the housing sector is defined as an unprecedented upsurge in house prices which cannot explained by fundamental determinants of the housing sector. This study examines demand-side factors of real estate sector in Turkey in order to expose whether house price increases in the country can be counted as a bubble. We use the Blanchard-Quah SVAR model to empirically reveal the relationships between the real mortgage interest rates, house price gap, price-rent-ratio and purchasing power parity. The results of the paper indicate that real interest rates and other variables have a significant explanatory power in the long run whereas house prices cannot be explained by these variables in the short run. Therefore it can be asserted that the house price increases in Turkey cannot be evaluated as a bubble in the long run.

Suggested Citation

  • Hulya Deniz Karakoyun, & Nurtac Yildirim, 2017. "Demand-side factors of housing price increases in Turkey: Blanchard-Quah SVAR model," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(3), pages 312-332, July.
    • Handle: RePEc:pdc:jrnbeh:v:13:y:2017:i:3:p:312-332
    DOI: 10.15208/beh.2017.23
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    More about this item

    Keywords

    Real estate; housing demand; real estate bubble; Blanchard-Quah; Turkey;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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