House price dynamics in Istanbul: District-level analysis of convergence clubs, spillovers, and key drivers

Abstract

This study analyzes the dynamics of house prices across Istanbul's districts using a unique dataset of house prices and socioeconomic characteristics from 2010Q1 to 2022Q1. The log-t convergence test identifies four convergence clubs, with their formation beginning after 2015, highlighting the heterogeneity within Istanbul's housing market. The spillover index shows moderate spillovers, predominantly flowing from less affluent to more affluent districts. Additionally, LASSO regression suggests that the formation of convergence clubs in Istanbul closely reflects the city's socioeconomic conditions and levels of material prosperity. Specifically, financial wealth, middle and low-socioeconomic status households, and the presence of certain retail chains (e.g., Mado, Starbucks, and Domino's Pizza) are significant factors in the formation of these clusters. Overall, the housing divide in Istanbul appears to be largely driven by income and socioeconomic class.