Investigation of the relationship between house price index and macroeconomic indicators by wavelet coherence analysis: The case of Turkey

The real estate sector has always been an important investment instrument for investors in developed and developing countries. In particular, the dynamics of the housing sector provide general information about national economies and financial markets. In the literature, there are many studies conducted with classical time series analysis methods in Turkey and abroad for different time periods in order to determine the variables affecting housing prices. While these models evaluate the temporal dimension of financial and economic variables, they do not provide information on the frequency dimension of variables. While recent studies in finance emphasize the importance of the frequency between variables, unlike the studies in the empirical literature, the wavelet coherence method is used in this study. In this thesis, the effects of certain macroeconomic indicators selected from the empirical literature on the house price index are analyzed. In the first part of the analysis, the relationship between the general house price index and macroeconomic indicators is discussed, and in the second part, the effects of the same independent variables on house prices in five regions of Istanbul (TR10), Ankara (TR51), Antalya (TR61), Hatay (TR63) and Ağrı (TRA2) are discussed. The period of analysis is January 2013-December 2023 and the results are obtained using Matlab software. The findings suggest that house prices in Turkey are affected by macroeconomic variables. Consistent with the empirical literature, house prices have a strong relationship with inflation, money supply and mortgage loan volume, whereas during crisis periods, mortgage interest rates, number of home sales, exchange rate, IPI and S&P CoreLogic Case-Schiller 20-City Home Price Index are added to the existing variables. The relationship between Turkey's overall house price index and regional house price index and macroeconomic variables is broadly parallel. An analysis of the regional house price index reveals that house prices in regions that receive touristic migration such as Antalya and Istanbul are affected by foreign investors in the medium and long run.