Housing price dynamics and bubble risk: the case of Turkey

Coskun Y., Seven U., ERTUĞRUL H. M., Alp A.

Housing Studies, vol.35, no.1, pp.50-86, 2020 (SSCI) identifier

  • Publication Type: Article / Article
  • Volume: 35 Issue: 1
  • Publication Date: 2020
  • Doi Number: 10.1080/02673037.2017.1363378
  • Journal Name: Housing Studies
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, Academic Search Premier, ASSIA, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, Agricultural & Environmental Science Database, Business Source Elite, Business Source Premier, EconLit, Educational research abstracts (ERA), Geobase, PAIS International, Political Science Complete, Public Affairs Index, Social services abstracts, Sociological abstracts, Worldwide Political Science Abstracts
  • Page Numbers: pp.50-86
  • Keywords: Bounds test, bubble, E44, G01, Housing, Kalman filter, R31, Turkey
  • Anadolu University Affiliated: No


Housing prices have increased substantially in some emerging markets in recent years. Turkish housing market has also experienced a boom over the last decade with rapid house price appreciations. This study is the first to employ two different house price indexes to analyze housing bubble in Turkey in two different time periods, 2010:M1–2014:M12 and 2007:M6–2014:M12. We first capture the determinants of housing price by employing Bounds test and then examine whether rising house prices have been justified by fundamentals by employing OLS/FMOLS/DOLS, Kalman filter and ARIMA models. The Bounds test results suggest that there is a long-term cointegration among house price indexes and housing rent, construction cost and real mortgage interest rate. The results imply that the Turkish housing market has experienced some cases of overvaluation, but not bubble formation. This evidence has several implications for house price dynamics and risks in the Turkish housing market. Based on Turkish experience, the study also draws policy implications for emerging housing markets.