Housing price dynamics and macroeconomic anchoring under prolonged inflation: evidence from Türkiye

Purpose This study examines the determinants of housing prices in Türkiye, a high-inflation emerging economy where housing price growth outpaces consumer inflation. It assesses whether housing prices remain aligned with macroeconomic fundamentals or whether financial and structural factors increasingly drive price dynamics. This analysis aims to determine whether short-term financial volatility and policy changes have overridden long-term economic drivers in shaping housing markets. Design/methodology/approach The analysis uses monthly data for Türkiye covering the period from 2013:M01 to 2025:M11. Separate demand-side and supply-side models are estimated within a Fourier-based framework. Long-run relationships are examined using Fourier unit root and cointegration tests, which allow for gradual structural shifts in the series. The study looks at short-term interactions using Toda-Yamamoto causality tests. The key variables in the analysis include housing credit volume, housing loan interest rates, consumer price inflation, cement production and construction costs. Together, these factors help capture the financial conditions and production-related pressures that drive changes in housing prices. Findings No stable long-run cointegration relationship is detected between housing prices and the selected macroeconomic variables in either specification. In contrast, the short-run results reveal clear bidirectional interactions between housing prices, credit conditions, housing loan interest rates and construction costs. Consumer price inflation does not exhibit a direct causal influence on housing prices within the estimated framework. The results indicate that housing price movements in Türkiye are only weakly anchored to a stable long-run equilibrium. Instead, price dynamics appear to be driven primarily by short-run financial feedback and cost-related pressures. This pattern indicates that the housing market adjusts through evolving interactions between credit and production conditions rather than through a stable macroeconomic linkage. Practical implications The study provides actionable insights for financial institutions, the construction sector and macroeconomic policy units. For the banking sector, the lack of long-run anchoring between housing prices and macroeconomic fundamentals suggests that mortgage lending risks should be evaluated through regime-sensitive models rather than static historical trends. For the construction industry, the findings emphasise that supply-side shocks – specifically cement and labour costs – have become more dominant than traditional demand-side variables, necessitating more robust cost-hedging strategies for project feasibility. Finally, for central banks and housing authorities, the results indicate that purely monetary interventions (such as interest rate adjustments) are insufficient to cool the market if supply-chain volatilities and construction cost inflations are not addressed simultaneously. Social implications The findings of this study highlight a critical social challenge regarding housing affordability for middle- and low-income households in Türkiye. As housing prices become increasingly decoupled from long-term macroeconomic fundamentals due to persistent inflation, traditional homeownership is becoming an unattainable goal for a significant portion of the population. This structural shift underscores the vital role of large-scale public housing projects (e.g. TOKI) and state-supported credit mechanisms as essential social safety nets. The study suggests that in a volatile market, these institutional interventions are not merely urban development tools but are crucial for maintaining social cohesion and ensuring equitable access to housing. Therefore, for public housing policies to remain effective, they must be integrated with strategies that address the rising construction costs and inflation expectations identified in this research. Originality/value This study focuses on the separate examination of demand- and supply-side factors within a framework that allows for gradual shifts and accounts for structural changes in the underlying relationships. In Türkiye, housing prices have persistently risen faster than general inflation, highlighting the role of prolonged inflation and ongoing credit expansion in shaping housing price linkages. Evidence from the analysis suggests that macroeconomic anchoring is progressively weakening. Consequently, housing prices have become increasingly sensitive to financial developments and structural cost pressures.