The Effects of Macroeconomics on Housing Affordability and Policy Recommendations: The Case of Türkiye

Housing affordability has been a significant global challenge, with macroeconomic factors identified as contributors. The ongoing trend of housing unaffordability indicates that merely recognising this issue is insufficient; it necessitates the formulation of appropriate policies to tackle these challenges. This study examines the rising trend of housing unaffordability, although shelter is a fundamental amenity that should be adequately addressed. Furthermore, uncertainty inherent in the country’s economy has exacerbated the situation. This study will adopt a quantitative approach, using the housing price index as the dependent variable. Independent variables will include inflation, exchange rate, policy interest rate, economic policy uncertainty (EPU) index, unemployment rate, mortgage rate, age of a house, number of bedrooms, economic growth rate - Gross Domestic Product (GDP), Consumer Price Index (CPI), construction permits, and money supply. The study will employ the VAR model to establish relationships between the house price index (HPI) and macroeconomic variables through shocks. The magnitude and direction of these shocks will form the basis for deriving necessary policy suggestions to address housing unaffordability in Turkey. Consequently, the findings are anticipated to pave the way for policy recommendations to overcome these challenges.