Housing Market Characteristics and Estimation of Housing Wealth in Turkey

Abstract

Home ownership is one of the most preferred forms of wealth accumulation for households in Turkey. Given the important functions performed by the housing asset, this paper provides a comprehensive look at the housing market characteristics during 1987-2006 period in Turkey. On the basis of these characteristics, the paper develops an estimation of quarterly housing wealth series using primary sources on housing stock, residential construction and average floor area prices obtained from building census, construction and occupancy permit statistics. Unlike the previous literature using the total number of households in the population, the housing wealth is estimated using urban dwellings with occupancy permits in order to capture the collateral channel, through which home owners can borrow from the financial institutions using their legally documented homes as collateral. Since there is a substantial undocumented and unauthorized dwelling stock in Turkey, using this methodology to measure the housing wealth will avoid the potential problems associated with identifying the extent of illegal housing. The movements of the estimated housing wealth series are consistent with the developments in the construction sector, and therefore it can be successfully used in econometric models analyzing the relationship between the housing wealth and consumption behaviour of households in Turkey.

Keywords: housing wealth, housing finance, housing policy

JEL Classification: E21, E44, G21, G28