Do credit supply and urbanization influence housing prices? Evidence from 31 provinces of Iran

Purpose This study aims to examine the simultaneous and interactive effects of credit supply and urbanization on housing prices in Iranian provinces. The significance of housing as a share of household portfolios, its role as a valuable commodity, has been the main focus of many studies in recent decades. However, housing prices and their fluctuations are influenced by several factors. The economic literature reveals that credit-driven growth and urbanization have emerged as prominent drivers of housing price fluctuations, and the interplay between credit supply and the degree of urbanization significantly affects housing prices in developing countries. Design/methodology/approach In this study, the authors investigate the impact of credit supply and urbanization on house prices across 31 Iranian provinces between 2010 and 2022. Diverse long-term estimations indicated that without controlling for total inflation and urban household income, credit supply has a large and statistically significant effect on housing prices. In these models, except for the fixed-effects regression with Driscoll–Kraay standard errors, urbanization negatively influenced housing prices. Findings By including overall inflation and urban household income, both credit and urbanization exhibited a significant positive effect on housing inflation in Iranian provinces. Moreover, these findings are supported by quantile regression. In addition, the results of the impulse response function indicated that a shock in credit supply increases housing prices. Originality/value Based on these findings, this study concluded with policy recommendations.