The Relationship Between Housing Price Index, Exchange Rate, PPI, Rent and Costs in Türkiye

Abstract

Purpose – This study investigates short- and long-run relationships between the housing price index (HPI) and the exchange rate, producer price index (PPI), rent, and housing cost in Türkiye, and produces short-term forecasts for the HPI.
Design/methodology/approach – Quarterly data for 2010Q1–2023Q4 are used. Variables are log-transformed; ADF and PP tests confirm I(1). Johansen cointegration indicates two long-run relations. A Vector Error Correction Model (VECM) is estimated, with IRFs and FEVD analyses applied.
Results – Results show two cointegrating relationships among the variables. In the short run, increases in PPI dampen HPI growth, while lagged rent has a negative effect. In the long run, rent and cost factors dominate HPI dynamics, while the exchange rate has limited influence.
Discussion – Findings highlight that the housing market in Türkiye is primarily shaped by cost and rent dynamics. While exchange-rate shocks have some effect, their explanatory power is relatively small. Policy design should jointly consider exchange-rate stability and cost–rent factors.