Financialization of Housing in Türkiye: An ARDL Approach

This paper investigates how financialization has shaped real mortgage prices in Türkiye between 2015 and 2024, employing monthly data. The findings of the Autoregressive Distributed Lag (ARDL) methodology reveal distinct long- and short-run dynamics in Türkiye’s housing market. Although non-performing mortgage loans initially elevate real mortgage prices, in the long run, an increase in non-performing mortgage loans results in a decrease in property prices, highlighting the delayed adverse impact of financial distress. The total quantity of sales to foreigners, often overlooked in previous studies, is found to be a key driver of housing price inflation in both the short and long term, particularly owing to Türkiye’s Citizenship by Investment (CBI) program. On the supply side, it is reported that occupation permits have a significant price-reducing effect in both terms, reinforcing the need to analyze both occupation and construction permits together to fully capture supply-side dynamics. The persistent negative response of the real mortgage prices to increased real mortgage lending rates reveals the profound impact of borrowing costs on dampening the demand. Conversely, an upward shift in material and labor costs considerably raises housing prices, underscoring the pass-through of construction costs into the real mortgage prices in Türkiye.