A simulation-based analysis of price dynamics in a real estate market inspired from Turkey

The real estate market in Turkey holds significant importance for the nation's economy and development. It serves as an important engine of economic growth, attracting both domestic and foreign investments through the years. Housing prices are an important concern for the government, homeowners, policymakers, and financial institutions. Numerous studies have been conducted regarding housing prices in literature. The primary objective of this study is to construct a system dynamics model based on Turkey's characteristics to mimic the basic structures of the Turkish real estate market and understand the reasons behind the cycles in sales and price through years. The developed model is tailored to reflect Turkey, using data related to the Turkish population, sales statistics, and price statistics for the initialization. System dynamics approach is utilized to simulate because it effectively represents the complex interactions and feedback loops inherent within the market. The created system dynamics model captures the long-term dynamics until the year 2050 partially and simulates how the market could evolve under various scenarios. Compared to the studies in relevant area, in this study, secondhand house market, actions of investors and the change of rental price are included to survey the market from various aspects. From 2010 to 2024, the developed model partially captures the real dynamics of Turkish housing market, however there are some external factors related to Turkey which cannot be included to the model. According to the findings, there are cycles caused by the imbalance of demand and supply in the market. Until 2050, rental prices of houses have increased exponentially, which has been reviewed and tried to be solved by the scenario and policies. Reducing interest rate to 20 % is found to be enough to prevent rental price increase through years. Moreover, by introducing around 200 000 more projects each year regularly, the average rental price of a house can be reduced by almost 60% in 2050.