Home-ownership, Housing Demand and Household Wealth Distribution in Turkey

Home-ownership, Housing Demand and Household Wealth Distribution in Turkey

Title:

Home-ownership, Housing Demand and Household Wealth Distribution in Turkey

Number:

17/14

Author(s):

Evren Ceritoğlu

Language:

English

Date:

June 2017

Abstract:

This paper analyses recent housing market developments in Turkey. In particular, we estimate permanent income elasticity, price elasticity and interest rate elasticity of housing demand. For this purpose, we utilize twelve consecutive waves of the Turkish Statistical Institute (TURKSTAT) Household Budget Surveys (HBS) from 2003 to 2014. The most difficult aspect of empirical analysis is the estimation of a hedonic house price index. We find that the permanent income elasticity of housing demand is approximately 24% in our restricted sample. The price elasticity of housing demand is between -29% and -35%, but it is not statistically significant. Interest rate elasticity of housing demand has a negative sign, but it is measured as a very small value and it is not statistically significant. Our estimates are modest compared to previous empirical findings for the Turkish economy and emerging market economies in the literature. Moreover, robustness checks reveal that the importance of income on housing demand remained at the same level between 2003 and 2014, while the roles of house prices and interest rates are weakened during this time period with respect to past periods. As a result, our empirical analysis confirms that income is the main determinant of home-ownership and housing wealth.

Keywords:

Home-ownership, Hedonic house price index, Housing demand, Household wealth distribution

JEL Codes:

C23; D12; R21

Home-ownership, Housing Demand and Household Wealth Distribution in Turkey
CENTRAL BANK OF THE REPUBLIC OF TURKEY Head Office Anafartalar Mah. İstiklal Cad. No:10 06050 Ulus Altındağ Ankara Phone : (+90 312) 507 50 00 | Fax : (+90 312) 507 56 40