Determinants of residential real estate prices in Turkey

The real estate market is a major determinant of economic growth in many countries. İt has experienced a drastic growth over the decades in many countries. Real estate market just like any other market is influenced by the forces of demand and supply where price is a key attribute. However, price is not homogenous as it subjected to fluctuations. The Turkish real estate market over the last 3 decades has experienced a drastic growth and it accounts for 19.5% of the total GDP in 2016. In order to understand the forces behind the price fluctuations we need to understand the factors that determine the prices of residential real estate in Turkey. This study analyses the determinants of residential real estate prices in Turkey. Monthly, quarterly and annual secondary data was collected for a period of 7 years from 2010 to 2016 from publications of government and financial institutions. Descriptive statistics was conducted to describe the basic features of the data in this study. Finally with the help of SPSS a multiple regression and backward elimination was carried out. The results shows that there is strong negative relation between Interest rate and house prices, weak negative relationship between house prices and inflation rate, strong positive relationship between house prices and population and a strong relationship between GDP and house prices. A multiple regression analysis shows the relationship between house prices and its determinants. The results from the multiple regressions revealed the same results, but it equally is statistically significant, another regression analysis this time called backward elimination is carried which consist of eliminating the insignificant variable of interest rate. This implies the real estate market in Turkey is significantly stable.