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

What is it about?

Abstract Design/Methodology/Approach: In this study, a two-stage novel estimation method is applied. First, in the first stage, bubble periods are identified through the right tailed supremum Augmented Dickey-Fuller test. Then, in the second stage, the determinants of these bubbles are identified and the housing bubble determinants of the pandemic relative to the pre-pandemic period are revealed. Purpose: The present study explores a very novel framework for the housing price bubbles in the Turkish economy during the pandemic. Relative to the pre-pandemic period, the probability of housing bubble formation is explored. Moreover, the possible determinants of housing bubble are also determined in the Turkish economy. Findings: The obtained findings show that there is an asset price bubble during the pandemic period in the housing market. Furthermore, the housing sector sales to foreign investors, the mortgage credit expansion, Turkish Lira depreciation against USD could increase the housing bubble formation, while and mortgage credit rate does not do so during the pandemic in the Turkish housing market. Originality: To the best of our knowledge, this is the first study to address the relative housing bubble determinants in an emerging market context during the pandemic.

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