Exploring the determinants of housing price bubbles in the Turkish economy: a COVID-related framework

Abstract

Purpose

This study aims to explore a novel framework for housing price bubbles in the Turkish economy during the pandemic. It examines the probability of housing bubble formation relative to the pre-pandemic period and identifies possible determinants of housing bubbles in the Turkish economy.

Design/methodology/approach

In this study, a two-stage novel estimation method is applied. In the first stage, bubble periods are identified through the right-tailed supremum augmented Dickey–Fuller test. In the second stage, the determinants of these bubbles are identified, and the housing bubble determinants during the COVID-19 pandemic are compared to the pre-pandemic period.

Findings

The findings indicate that there is an asset price bubble in the housing market during the pandemic period. Furthermore, mortgage credit expansion, mortgage credit rates and the depreciation of the Turkish Lira against the USD could increase housing bubble formation. However, housing sector sales to foreign investors do not contribute to housing bubble formation during the pandemic in the Turkish housing market.

Originality/value

To the best of the author’s knowledge, this is the first study to address the relative determinants of housing bubbles in an emerging market context during the pandemic.

Citation

Doruk, Ö.T. (2024), "Exploring the determinants of housing price bubbles in the Turkish economy: a COVID-related framework", International Journal of Housing Markets and Analysis, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJHMA-05-2024-0073