Why Did House Prices Go Up During COVID-19 Pandemic? Policy-Driven or Market-Driven?

During the spread of the COVID-19 virus, governments in many countries took temporary measures to mitigate and/or remove the cost of its negative effects on both society and the economy. In Türkiye, as in many countries, the deposit banks cut mortgage interest rates. Thus, Türkiye has experienced large increases in house prices, as have many countries. Türkiye has also become the country with the highest average annual rate of house price increase among the Organisation for Economic Co-operation and Development (OECD) countries during the pandemic period. However, despite an increase in the number of studies on house prices or mortgage loans during the pandemic period, there is a research gap in terms of a comparison of the relationship between house prices and mortgage loans in the pre-pandemic and the pandemic periods compared with that on other assets or in other sectors,. This study aims to rectify this gap. To achieve this, both the Fourier Granger and the Fourier Toda-Yamamoto causality tests are used. The results indicate that there are differences in both periods of time with respect to the relationship between mortgage loans and house prices in Türkiye, and that there is a causal relationship between both factors in the prepandemic period, but not during the pandemic period.