Speculative House Price Bubble Dynamics and Bursting Mechanisms in Türkiye: A Threshold Regression Model Proposal

One of the most current social and socio-economic problems in Türkiye is the speculative bubbles that have formed in the housing markets due to the current economic and financial crisis, making it difficult for households to own a house. This study analyzes the dynamics and bursting mechanisms of speculative price bubbles in the Turkish housing market. The GSADF test was applied using monthly data for 2012-2024 to identify bubble periods in the housing market. In the determined bubble periods, robust regression analysis was performed to determine the main factors affecting these price formations. In addition, the Kalman filtering method was used to examine the dynamic coefficients of housing price bubbles that change over time. The findings show that falling interest rates trigger housing price bubbles in Türkiye in an inflationary process; the bursting of the bubbles is associated with increasing domestic and foreign risk premiums, interest rate expectations, and realized interest rate increases. In addition, it investigated how the current housing bubble can burst in a controlled manner through the threshold regression model. The study results reveal that maintaining the interest rate difference between Türkiye and the US within 10% to 17% is critical in preventing financial and economic instabilities regarding housing prices. In addition, it can be argued that the current inflation rate and risk premiums should be managed effectively to ensure stability in housing prices.