Housing Loans and Economic Trends : An Emprical Analysis for Turkey

It may be observed that Turkish mortgage market has experienced a rapid development in recent years thanks to relatively stable macro-economic conditions. It is also important to note that housing market is of comparatively sound during the process of global financial turmoil. But it is obvious that the market is less developed according to several market completeness criteria. In this context, the contribution of the paper is to empirically analyze the factors affecting housing loans in Turkey, assumed as the critical factor of the development of the mortgage market.To employ vector error correction model and granger causality tests, the objective of the paper is to present the findings of dynamic causal relationships between housing loans and macro-economic indicators related to general economy and housing markets in Turkey. In the research, we empirically analyze both impacts of widely used macro-economic indicators (CPI, unemployment ratio, real interest rate, current account, monetary aggregate), and also some additional variables, specifically involving household assets, income, subsidies and also house price index. In addition to other contributions of the paper, longer period house price index constructed by the author by combining actual house price index and a proxy index would be specifically interesting for the current literature