Main determinants of house prices: Effects of construction cost and house sales to foreigners

Housing prices have increased worldwide with the increase in commodity prices. They have become a primary investment tool most consumers prefer, especially to protect themselves from inflation. One of the main questions is which macroeconomic factors affect the housing price index, especially the increase in the number of houses sold to foreigners and the increase in construction costs. The study will answer whether the increase in housing costs or the increase in sales to foreigners causes an increase in housing prices. The variables in the study consist of macroeconomic variables that were mostly included in previous studies. Data from January 2015 to March 2022 consisted of 87-period data. Time series analysis has been tried to be explained with the help of the ARDL model by performing a boundary test. In the model, all variables were significant, but a long-term relationship was found, not a short-term one. Tests have demonstrated the model's accuracy for deviation from basic assumptions and structural break tests. Taking the logarithms of the variables in the model makes it possible to interpret them flexibly. In this context, contrary to expectations, it was determined that house sales to foreigners decreased the house price index, and the biggest reason for the increase in house prices was the cost increases that took place worldwide. Other variables that increase and decrease the housing price index are interpreted, and suggestions are made to solve the housing problem. It is considered that the model gives an idea to understand the increase in housing prices, but other social factors should also be considered for housing demand.