There was a notable housing price inflation in aggregate/local levels in Turkey during the last few years. Although the country’s economic fundamentals remain strong, the probability of a housing bubble is a heated debate among market participants. This timely investigation brings greater clarity to whether the Turkish housing market is in a bubble. The study uses a multi-strand approach to dissect the bubble over the period of Jan. 2010 - Dec. 2014. First, monthly/annual price-to-income and monthly price-to-rent ratios are examined for the national Turkish as well as regional Istanbul, Izmir and Ankara housing markets. Second, an extended CASE and SHILLER (2003) model is applied assessing the interdependence between housing prices and a series of explanatory variables. Lastly, the Right Tail Augmented Dickey-Fuller (Rtadf) test is performed to support the overall analysis. This study finds that neither affordability ratios nor regression estimates support the existence of the bubble in Turkey.
AKERLOF G.A. SHILLER R.J. 2009 Animal Spirits: How Human Psychology Drives the Economy and Why it Matters for Global Capitalism Princeton University Press.
AMBROSE B.W. EICHHOLTZ P. LINDENTHAL T. 2013 House Prices and Fundamentals: 355 Years of Evidence Journal of Money Credit and Banking No. 45 (2-3): pp. 477-491.
AUGUSTYNIAK H. LASZEK J. OLSZEWSKI K. WASZCZUK J. 2013 Modeling of Cycles in the Residential Ral Estate Market-Interactions Between the Primary and the Secondary Market and Multiplier Effects Working Paper No. 143 National Bank of Poland.
BAKER D. 2008 The Housing Bubble and the Financial Crisis Real-World Economics Review No. 46 pp. 73-81.
BANK FOR INTERNATIONAL SETTLEMENTS 2014 Residential Property Price Developments - Third Quarter of 2014 [Internet]. Available at: [Accessed 07 April 2015].
BARLEVY G. 2007 Economic Theory and Asset Bubbles Economic Perspectives Federal Reserve Bank of Chicago No. Q III pp. 44-59.
BARLOWE R. 1958 Land Resource Economics Englewood Cliffs NJ: Prentice-Hall.
BARRAS R. 2009 Building Cycles: Growth and Instability (Real Estate Issues) Wiley-Blackwell London pp. 448.
Barth J.R. LEA M. LI T. 2012 China’s Housing Market: Is a Bubble About to Burst? Milken Institute.
BESOMI D. 2014 Crises and Cycles in Economic Dictionaries and Encyclopaedias Routledge.
BINAY S. SALMAN F. 2008 A Critique on Turkish Real Estate market. Discussion Paper Working Paper No. 2008/8 Turkish Economic Association.
BJORKLUND K. SODERBERG B. 1999 Property Cycles Speculative Bubbles and the Gross Income Multiplier Journal of Real Estate Research No. 18 (1): pp. 151-174.
BLACK A. FRASER P. HOESLI M. 2006 House Prices Fundamentals and Bubbles Journal of Business Finance & Accounting No. 33(9-10) pp. 1535-1555.
BLANCHARD O. WATSON M. 1982 Bubbles Rational Expectations and Financial Markets Working Paper No. 945 NBER.
BRAM J. 2012 To Buy or not to Buy? The Changing Relationship Between Manhattan Rents and Home Prices Federal Reserve Bank of New York Current Issues in Economics and Finance No. 18 (9) pp. 1-7.
BROOKS C. TSOLACOS S. 2010 Real Estate Modelling and Forecasting Cambridge University Press.
BRUNNERMEIER M.K. 2016 Bubbles. (in Banking Crises: Perspectives from the New Palgrave Dictionary of Economics Ed. Jones G. Palgrave MacMillan ): pp. 28-37.
BRZEZICKA J. 2016 Speculative Bubbles And Their Components On The Real Estate Market-A Preliminary Analysis Real Estate Management and Valuation No. 24(1) pp. 87-99.
BUYUKDUMAN A. (2014) Bir Kent Efsanesi: Konut Balonu (An Urban Legend: Housing Bubble) Scala Yayıncılık Istanbul (in Turkish).
CAMERON G. MUELLBAUER J. MURPHY A. 2006 Was There A British House Price Bubble? Evidence from a Regional Panel Department of Economics Working Papers No: 276 University of Oxford.
CANARELLA G. MILLER S. POLLARD S. 2012 Unit Roots and Structural Change: an Application to US House Price Indices Urban Studies No. 49 (4) pp.757-776.
CASE K.E. SHILLER R.J. 2003 Is there a Bubble in the Housing Market? Brookings Papers on Economic Activity No. 2 pp. 299-342.
CASPI I. 2016 Rtadf: Testing for Bubbles with EViews November 6 working paper Bank of Israel. Available at:
CENTRAL BANK OF TURKEY (CBRT) 2010 Methodological Information on the House Price Index Available at: < http://www.tcmb.gov.tr/wps/wcm/connect/6c710268-4dfb-480a-9121-faf89e5888f3/HPI_Methodological_Information.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE6c710268-4dfb-480a-9121-faf89e5888f3 [Accessed 26 January 2017].
CENTRAL BANK OF TURKEY (CBRT) 2015 Market Statistics [Internet]. Available at: [Accessed 07 August 2015].
CHEN K. WEN Y. 2013 The Great Chinese Housing Boom: Causes Consequences and Future Paths Tsinghua Workshop in Macroeconomics Tsinghua University.
COŞKUN Y. 2011 The Global Financial Crisis and the Turkish Housing Market: Is There a Success Story? Housing Finance International No. 25 (3) pp. 6-14.
COŞKUN Y. 2013 Housing-Construction Market Risks in Turkey: Overrated or Underestimated? Housing Finance International No. 26 (4) pp.47-55.
COŞKUN Y. WATKINS C. WHITE M. 2014 Macroeconomic Change Housing Affordability and Public Policies: The Case of Turkey Working Paper 2014 ENHR Conference 1-4 July Scotland.
COŞKUN Y. ERTUĞRUL M.H. SEVEN U. ALP A. 2017 Housing Price Dynamics and Bubble Risk: The Case of Turkey. Housing Studies (forthcoming).
DEMOGRAPHIA 2015 12th Annual Demographia International Housing Affordability Survey: 2016. Available at: < http://www.demographia.com/dhi.pdf > [Accessed 07 June 2016].
DOLPHIN T. GRIFFITH M. 2011 Forever Blowing Bubbles: Housing Role in the UK Economy Report in Institute for public policy research. London.
ELOY C.M. CLAUDIA F.C. 2014 Brazil’s house price surge. Housing Finance International Summer pp. 17-26.
EMLAK KONUT GYO. 2014 Gayrimenkul ve Konut Sektörüne Bakış (Overview of Real Estate and Housing Sector) Market Report [Internet]. Available at: [Accessed 06 April 2015] (in Turkish).
EROL I. 2015 Türkiye’de Konut Balonu Var Mı? Konut Sektörü Kapitalizasyon Oranları Analizi (Is there a Housing Bubble in Turkey: Capitalization Ratio Analysis of Housing Sector) in Özçelik E. and Taymaz E (Eds). Türkiye Ekonomisinin Dünü Bugünü Yarını Yakup Kepenek’e ve Oktar Türel’e Armağan [in Turkish] Imge Kitabevi Yayınları pp. 323-344 [in Turkish].
FAWLEY B.W. WEN Y. 2013 The Great Chinese Housing Boom Economic Synopses No. 13 Federal Reserve Bank of St. Louis.
FENG Q. WU G.L. 2015 Bubble or Riddle? An Asset-Pricing Approach Evaluation on China's Housing Market Economic Modelling No. 46 pp. 376-83.
FERNÁNDEZ R.B. 1981 Methodological Note on the Estimation of Time Series Review of Economic and Statistics no. 63 (3) pp.471-478.
FINANSINVEST 2014 A Housing Price Bubble in Turkey? No Not Yet Market Report 9 July.
FIPE ZAP 2013 Indice Fipe Zap [Internet]. Available at: [Accessed 07 March 2015].
FORBES 2014 Why the Worst is Still Ahead for Turkey's Bubble Economy [Internet] Available at: [Accessed 10 February 2015].
FOX R. TULIP P. 2014 Is Housing Overvalued? Research Discussion Paper. RDP 2014-06. Reserve Bank of Australia.
GALLIN J. 2008 The Long-Run Relationship between House Prices and Rents Real Estate Economics no. 36 (4): pp.635-58.
GERARDI K. FOOTE C. WILLEN P. 2010 Reasonable People did Disagree: Optimism and Pessimism about the US Housing Market before the Crash” Discussion Paper No.10-5 FRB of Boston.
GEYIK E.U. 2012 Does Central Bank of Republic of Turkey React to Asset Prices? No: 02 / 2012 Working Paper Institute of Social Sciences Namık Kemal University.
GIROUARD N. KENNEDY M. NOORD P. ANDRÉ C. 2006 Recent House Price Developments: the Role of Fundamentals Working Paper no. 475 ECO/WKP(2006)3 OECD Economic Department.
GLINDRO E.T. SUBHANIJ T. SZETO J. ZHU H. 2011 Determinants of House Prices in Nine Asia-Pacific Economies International Journal of Central Banking No. 7 (3) pp. 163-204
GOODKIND N. 2014 Roubini: We're in an Asset Bubble and it Won't Pop Until 2016 [Internet] Available at: [Accessed 04 February 2015].
HALK YATIRIM 2015 Makro Ekonomik Özel Not: Türkiye’de Konut Sektörü: ‘Balon’ Değil; Arz-Talep Dengesi (Housing Sector in Turkey: Not Bubble but the Equilibrium of Supply-Demand) [Internet] Available at: [Accessed 5 August 2015] (in Turkish).
HIMMELBERG C. MAYER C. SINAI T. 2005 Assessing High House Prices: Bubbles Fundamentals and Misperceptions Journal of Economic Perspectives No. 19 (4) 67-92.
HLAVÁČEK M. KOMÁREK L. 2009 Housing Price Bubbles and their Determinants in the Czech Republic and its Regions Working Paper December Czech National Bank.
HOMM U. AND BREITUNG J. 2012 Testing for Speculative Bubbles in Stock Markets: A Comparison of Alternative Methods Journal of Financial Econometrics No. 10(1) pp. 198-231.
HOYT H. 1933 One Hundred Years of Land Values in Chicago Chicago IL: University of Chicago Press.
IMF 2015a Global Housing Watch: Quarterly Update March. Available at: [Accessed 06 April 2015].
IMF 2015b Price-to-Rent Ratio Data 2015q3 Available at: < http://www.imf.org/external/ research/housing/> [Accessed 08 June 2015].
JADEVICIUS A. HUSTON S. 2014 A “family of cycles” - major and auxiliary business cycles. Journal of Property Investment & Finance No. 32 (3) pp. 306-323.
JOEBGES H. DULLIEN S. MÁRQUEZ-VELÁZQUEZ A. 2015 What causes housing bubbles? A theoretical and empirical inquiry Study for the Macroeconomic Policy Institute Hans-Böckler-Foundation Düsseldorf. November. No. 43.
JONES B. 2014 Identifying Speculative Bubbles: A Two-Pillar Surveillance Framework Working Paper IMF.
KARA H. ÖĞÜNÇ F. (2012) Döviz Kuru ve İthalat Fiyatlarinin Yurt İçi Fiyatlara Etkisi (Pass-Through from Exchange Rates and Import Prices to Domestic Prices) İktisat İşletme ve Finans No. 27 (317) pp. 9-28 (in Turkish).
KARAMUJIC M.K. 2013 Housing Affordability: Importance Measures and an Empirical Assessment University of Sarajevo School of Economics and Business Sarajevo Bosnia and Hercegovine.
KARASU M. N. 2015 Understanding Real Estate Bubbles: An Analysis of the Recent Trends in the Turkish Housing Market Dissertation Master of Science METU. Available at: [Accessed 15 September 2015].
KAYA A. BOZKURT A.T. BAŞTAN E.M. AYANOĞLU O.A. 2012 Constructing a House Price Index for Turkey Working Paper July BIS. Available at: [Accessed 07 March 2015].
KHOLDY S. SOHRABIAN A. 1998 Economic Fundamentals and Housing Market Applied Economics Letters 5 (7) pp. 459-461.
KINDLEBERGER C.P. 2001 Manias Panics and Crashes: A History of Financial Crises (Wiley Investment Classics) 4th. Ed. John Wiley & Sons.
KINDLEBERGER C.P. ALIBER R.Z. 2005 Manias Panics and Crashes: A History of Financial Crises. 5th.ed. John Wiley & Sons.
KOSAREVA N. TUMANOV A. 2008 Assessing Housing Affordability in Russia Problems of Economic Transition no. 50 (10) pp. 6-29.
KRAINER J. WEI C. 2004 House Prices and Fundamental Value FRBSF Economic Letter. 2004-27.
KRUGMAN P. 2005 That Hissing Sound NYTIMES[Internet] Available at: [Accessed 12 February 2015].
KWIATKOWSKI D. PHILLIPS P.C.B. SCHMIDT P. SHIN Y. 1992 Testing The Null Hypothesis Of Stationarity Against The Alternative Of A Unit Root: How Sure Are We That Economic Time Series Have A Unit Root? Journal of Econometrics No. 54 (1-3) pp.159-178.
MACKINNON J.G. 1991 Critical Values for Cointegration Tests in: Engle R.F. and Granger C.W.J. Longrun Economic Relationships: Readings in Cointegration Oxford University Press.
MALLICK H. MAHALIK M.K. 2012 Fundamental or Speculative Factors in the Housing Markets of Emerging Economies? Some Lessons from China. Journal of Economic Policy Reform No. 15 (1) pp. 57-67.
MARTIN R. 2011 The Local Geographies of the Financial Crisis: From the Housing Bubble to Economic Recession and Beyond Journal of Economic Geography No. 11 (4) pp. 587-618.
MAYER C. 2011 Housing Bubbles: a Survey Annual Review of Economics Vol. 3 pp. 559-577.
MENGJIE L. REED R. WU H. 2008 Challenges Facing Housing Affordability In Beijing In The Twenty-First Century International Hournal of Housing Markets and Analysis No. 1 (3): pp. 275-287.
MILLER M. STIGLITZ J. 2010 Leverage and Asset Bubbles: Averting Armageddon With Chapter 11? The Economic Journal No. 120 (544) pp. 500-518.
MOINAS S. POUGET S. 2013 The Bubble Game: An Experimental Study of Speculation Econometrica No. 81 (4) pp. 1507-1539.
MOODY’S 2016 Announcement: Moody's: Mortgage Covered Bonds among Safest Credit Instruments in Turkey Issuance May Increase [Internet]. Available at: < https://www.moodys.com> [Accessed 26 May 2016].
NEWEY W.K. WEST K.D. 1987. A Simple Positive Semi-Definite Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Econometrica no. 55 (3) pp.703-708.
NUMBEO 2015 Property prices index for country 2015 mid-year [Internet]. Available at: [Accessed 05 August 2015].
OECD 2005 Recent House Price Developments: The Role of Fundamentals in OECD Economic Outlook No. 78 Chapter III pp. 123-154.
PHILLIPS P.C.B. WU Y. AND YU J. 2011 Explosive Behavior in the 1990s Nasdaq: When did Exuberance Escalate Asset Values? International Economic Review No. 52 pp. 201-226.
PHILLIPS P.C.B SHI S.-P. AND YU J. 2015 Testing for multiple bubbles: historical episodes of exuberance and collapse in the S&P 500. International Economic Review no. 56 (4) pp. 1043-1078.
PITROS C. AND ARAYICI Y. 2016 How to Identify Housing Bubbles? A Decision Support Model International Journal of Housing Markets and Analysis No. 9 (2) pp. 190-221.
PITROS C. COSKUN Y ARAYICI Y. 2017 Is there a Bubbly Euphoria in the Turkish Housing Market? (forthcoming)
RAPOZA K. 2015 Brazil Housing Bubble Deflates but Still Quite Large Forbes. [Internet]. Available at: < http://www.forbes.com/sites/kenrapoza/2015/01/08/brazil-housing-bubble-deflates-but-stillquite-large/> [Accessed 06 March 2015].
REBUCCI A. 2014 Are Emerging Markets Ready for the Housing Earthquake? FT. [Internet]. Available at: [Accessed 06 April 2015].
REBUCCI A. 2015 The Emerging Markets Housing Bubble 2/27/2015 Huffington Post [Internet]. Available at: [Accessed 06 April 2015].
REIDIN 2015 Market Statistics [provided by special permission].
REN Y. XIONG C. YUAN Y. 2012 House Price Bubbles in China China Economic Review No. 23 pp. 786-800.
REPUBLIC OF TURKEY MINISTRY OF ECONOMY (RTME). (2012) Foreign Direct Investments in Turkey 2011 April. Available at: [Accessed 05 July 2015].
RODRIK D. 2012 The Turkish Economy after the Global Financial Crisis Ekonomi-tek No. 1 (1) pp. 41-61.
ROUBINI N. 2013 Housing Bubble 2.0 Can only End Badly The Guardian. [Internet] Available at: [Accessed 12 February 2015].
SCHMIDT B. CASTELLANI M. 2013 Shiller Warns of Housing Bubble after 225% Surge: Brazil Credit [Internet]. Available at: [Accessed 06 March 2015].
SHEN Y. HUI E. C. LIU H. 2005 Housing Price Bubble in Beijing and Shanghai Management Decision no. 43(4) pp. 611-627.
SHILLER R.J. 1992 Market Volatility Massachusetts: MIT Press.
SHILLER R.J. 2005 The Bubble's New Home [Internet] Available at: [Accessed 12 February 2015].
SHILLER R. J. 2006 Irrational Exuberance 2nd.ed. Crown Business.
SHILLER R.J. 2012 The Subprime Solution: How Today's Global Financial Crisis Happened and What to Do about it Princeton University Press.
SHILLER R.J. 2013 Finance and the Good Society. Princeton University Press.
SHILLER R.J. 2014a Speculative Asset Prices (Nobel Prize Lecture) Discussion Paper No. 1936 Cowles Foundation Yale University.
SHILLER R.J. 2014b Robert Shiller on Brazil Housing Bubble [Internet]. Available at: [Accessed 06 March 2015].
SMITH M.H. SMITH G. 2006 Bubble Bubble where's the Housing Bubble? Brookings Papers on Economic Activity 37 (1) pp. 1-50.
SMITH V.L. SUCHANEK G.L. WILLIAMS A.W. 1988 Bubbles Crashes and Endogenous Expectations in Experimental Spot Asset Markets Econometrica 56 1119-1151.
STANDARD & POOR’S 2015 Housing Markets in Israel Russia South Africa and Turkey Show Resilience to Weaker Economic Conditions Economic Research [Internet] Available at: [Accessed 7 April 2015].
STIGLITZ J. 2007 House of Cards The Gaurdian [Internet] Available at: [Accessed 12 February 2015].
THE BROOKINGS INSTITUTION 2015 Global Metro Monitor 2014 Parilla J. Trujillo J.L. and Berube A. and Ran T. (Eds.) [Internet] Availble at: [Accessed 6 April 2015].
THE ECONOMIST 2015 Global House Prices [Internet] Available at: [Accessed 05 August 2015].
THE FINANCIAL TIMES 2014 Turkey’s Construction Boom Appears to be Over Nov 27 FT [Internet]. Available at: [Accessed 5 April 2015].
THE FINANCIAL TIMES 2015 Turkey: A Flagging Growth Story May 18.
THE NEW YORK TIMES 2014 Alarm over Istanbul’s Building Boom NYTIMES [Internet] Available at: [Accessed 5 April 2015].
TSAI C.I. 2013 Housing Affordability Self-Occupancy Housing Demand and Housing Price Dynamics Journal of Habitat International no. 40 pp. 73-81.
TRULIA 2016 House Price to Rent. [Internet] Available at: [Accessed 5 July 2015].
TURKSTAT 2015b Data Set: Seasonally Adjusted Indices Based on Individual Questions Concerning the Construction Sector Tendency [Internet] Available at: [Accessed 5 August 2015].
TURKSTAT 2016 Data Set: Gross Domestic Product Per Capita by Provinces 2004-2014 [Internet] Available at: [Accessed 10 February 2017].
ULI and PWC 2012 Emerging Trends in Real Estate Europe market report pp.60.
UNCTAD 2014 World Investment Report 2014: Investing in the SDGs: an Action Plan United Nations Conference on Trade and Development.
WANG Z. ZHANG Q. 2014 Fundamental Factors in the Housing Markets of China Journal of Housing Economics 25 pp. 53-61.
WATSON K. 2014 Brazil Property Prices: Fears of ‘Bubble' in Home Costs” [Internet] Available at: [Accessed 06 March 2015].
WEISE A. D. PHILIPS J. W. HOCHHEIM N. 2015 Cyclicity of Housing Markets under the Specific Condition of the Existence of a Bubble in the Real Estate Market Real Estate Management and Valuation No. 23(3) pp. 85-98.WORLD BANK 2015 Indicators [Internet]. Available at: [Accessed 07 April 2015].
YALCINER K. COŞKUN Y. 2014. Conditions of Mortgage Market Development: A Critical Empirical Review for Turkey İktisat İşletme Finans No. 29 (339) pp. 59-94.
ZARNOWITZ V. 1992 Business Cycles: Theory History Indicators and Forecasting University of Chicago Press Chicago.
ZEREN F. ERGUZEL O.Ş. 2015. Testing For Bubbles in the Housing Market: Further Evidence from Turkey Financial Studies No. 19 (1) pp. 40-52.