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A Critique on Turkish Real Estate Market

  • Sukru Binay

    (The Central Bank of Turkey)

  • Ferhan Salman

    (The Central Bank of Turkey)

We discuss issues of real estate price bubble, the extent of wealth effects, affordability, financial deepening and credit market risks. Our simulations indicate that given current wealth levels, cost of credit and maturity, average homes are not affordable by average consumers. The market requires further reduction in the cost of credit and extension of maturity to manage a significant demand shift in the real estate market. We present evidence that Turkey’s credit markets are shallow to result in a banking crisis emerging from real estate credits. Finally, we document evidence in favor of the presence of wealth effects on consumption.

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File URL: http://www.tek.org.tr/dosyalar/critique_6may2008.pdf
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Paper provided by Turkish Economic Association in its series Working Papers with number 2008/8.

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Length: 40 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:tek:wpaper:2008/8
Contact details of provider: Postal: Hoşdere Cad. 24/4, TR-Çankaya, Ankara
Phone: (+90 312) 468 25 89
Fax: (+90 312) 468 25 99
Web page: http://www.tek.org.tr/
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  1. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2012. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Department of Economics, Working Paper Series qt6px1d1sc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Alexander Ludwig & Torsten Sløk, 2002. "The Impact of Changes in Stock Prices and House Priceson Consumption in OECD Countries," IMF Working Papers 02/1, International Monetary Fund.
  3. James M. Poterba & Andrew A. Samwick, 1995. "Stock Ownership Patterns, Stock Market Fluctuations, and Consumption," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 295-372.
  4. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1990. "The Stock Market and Investment: Is the Market a Sideshow?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 157-216.
  5. Engelhardt, Gary V., 1996. "House prices and home owner saving behavior," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 313-336, June.
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