Interdependence between foreigner housing acquisitions and housing price increase in Turkey during the COVID-19 pandemic era

Abstract

Purpose This study aims to establish the relationship between house acquisitions by foreigners (HAF) and house price index (HPI) in Turkey. Design/methodology/approach Due to the nature of this study, the data spans from January 2020 to March 2022. The house price index and the number of foreign house acquisitions across three provinces: Ankara, Izmir and Bursa, and national-level data were obtained from the TurkStat database. Consumer price index (CPI) and Turkish interest rates are control variables. In addition, monthly Turkish interest rates and CPI were obtained from the investing.com and TurkStat database, respectively. Furthermore, this study used autoregressive-distributed lag and Toda Yamamoto Granger causality models to avoid analysis bias. HPI and HAF are the variables used to accomplish the objectives of this study. Findings This study established a short-run equilibrium between foreign house acquisitions at the provincial and national levels. The short-run deviations were adjusted faster, ranging from 57.53% to 89.24% for some provinces, while Izmir is struggling to adjust at 6.48%. Both unidirectional and bidirectional Granger causality evidence suggests that the Turkish house price index increases at the national and provincial levels. This finding suggests the need for continuous policy intervention in the Turkish housing market because house prices play a pivotal role in Turkish economic development and daily lives. Research limitations/implications This study’s scope and single-country study are its limitations. However, those limitations make the findings appropriate for the country of the study rather than generalising the results. Practical implications The study provides empirical evidence that foreign housing acquisition contributes negatively to housing affordability in Turkey and calls for authority intervention. This is because housing is considered shelter, a fundamental need to which citizens are expected to be entitled. Most citizens are low- and medium-income earners who may be unable to afford a house out of their income if it becomes costly. Once the expenditure to secure housing exceeds 30% of their income, it is considered unaffordable. Originality/value To the authors' best knowledge, this is the first empirical study that established the influence of foreign house acquisitions on Turkish house price increases and adversely reduced house affordability by Turkish citizens. The study is the first on foreign Turkish housing acquisition that used both theory of ownership and justice motivation theory to explain HAF.