Understanding real estate bubbles: an analysis of the recent trends in the Turkish housing market

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2015
Karasu, Mustafa Nusret
The main aim of this thesis is to determine whether there is a real estate bubble in Turkey recently, where the house prices are increasing rapidly. In order to do this, the thesis tries to define the bubble concept, by reviewing literature. The common view among economists is that bubbles are deviation of prices from their fundamentals which is associated with sudden increases in prices. We usually witness harsh economic crises after the bursts of bubbles in economies and this constitutes the source of the motivation of this thesis. After examining several earlier examples and some common symptoms of real estate bubbles, the thesis documents the Turkish housing market indicators in order to be informed about the current state. Afterwards some econometric methods are performed. Using a 10 years long dataset (2005-2014), this is among the first comprehensive studies on housing bubble for Turkey. Even though the exposure of the real estate market on the financial sector is lower in Turkey compared to advanced countries, housing loans are significantly increasing. The results suggest that Turkish housing sector is quite active especially after 2012 and some symptoms of earlier examples match with the current situation. Therefore the year 2012 can be argued as the beginning of the current boom and it will be convenient to call it bubble if this trend continues for several years.

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Citation Formats
M. N. Karasu, “Understanding real estate bubbles: an analysis of the recent trends in the Turkish housing market,” M.S. - Master of Science, Middle East Technical University, 2015.