Detecting housing price bubbles using panel unit roots tests

The current developments in the global economy indicate that fluctuations in housing price have important effect on macroeconomic stability. Housing price is one of the indicators of household prosperity. Therefore, excessive volatility in housing market may influence macroeconomic prosperity. Especially it has recently seen higher increases in housing price in Turkey than in previous years. The aim of the study is to investigate regional house price bubbles in Turkish housing market using different panel unit root tests, which are CADF, SURADF, PANKPSS, Fourier KSS, sequential ADF and generalized sequential ADF unit root tests and KPSS stationarity test with sharp and smooth breaks. Therefore, the advantages and performances of so-called unit root tests were compared. The results of the analysis show that the presence of the bubbles in some regions was evidenced by CADF and SURADF unit root tests, while any evidence regarding the presence of bubble was not found by PANKPSS, FKSS unit root tests and KPSS stationarity test with sharp and smooth breaks. This study contributes to the existing literature in comparing of new methods used in detecting of the bubbles in housing prices.