Determinants of house demand: Evidence from ARDL bound and granger non-causality tests for Turkey

One of the basic needs of people, housing has become a dominant sector steering the economy. The housing market changes to housing supply and housing demand. To reaching detailed findings, housing demand and housing supply are separately analyzed in the housing economics literature. In this study, it is focused on housing demand and determinants of housing demand of Turkey. The main motivation of this study is that studies on housing demand of Turkey are insufficient in terms of both quantity and quality. Unlike from other studies, in this study i) theoretical basis of housing demand rest on user cost theory of housing, ii) noncompatible with one another and arguable finding in the literature are reanalyzed, iii) contemporary application in econometrical literature are given place. So reevaluating the determinants of housing demand, it is aimed to contribute to the literature. In this study, variables determining housing demand are price, housing maintenance and repair cost, housing rent, housing credit interest rate, housing sales to foreigners, expectations, and income. In the determination of variables, availability of data takes a role as far as theories. In econometrical analyzes, using monthly data between 2013:1 and 2018:7, an ARDL model is estimated and then long term and short term relationships are analyzed. Lastly, to test the robustness of findings, the Granger non-causality test is performed. As a consequence, it is found that housing price, income and housing sell to foreigners increase the housing demand. Furthermore, the most effective factors leading to an increase in housing demand are housing price and income. The findings may be an indicator that housing is perceived as an investment instrument in Turkey. Although it is found that housing credit interest rate and rent affect negatively housing demand. It is reached that there is no statistically significant effect of housing maintenance and repair cost on housing demand.