by Melih Alsaç
The impact of economic factors on the housing market has always been a matter of curiosity for investors and homeowners. In particular, the impact of exchange rate changes on house prices is frequently discussed. However, the relationship between these two factors is far from simple and involves various complex dynamics.
Land and Structure: Key Elements in Price Determination
First-hand housing prices are largely determined by land and construction costs. Land prices in Turkey are often constrained by local zoning practices and regional conditions. Construction is usually built with local labor and local materials. Therefore, exchange rates do not have a direct impact on land and construction costs.
Highlights:
- Land Prices: Local conditions and zoning are decisive.
- Building Costs: Local labor and materials are predominantly used.
The Effects of Exchange Rate in the Construction Process
Exchange rate changes may have an impact on some inputs used in the construction process. In particular, imported materials, energy costs and transportation costs are affected by exchange rate fluctuations. This may indirectly increase construction costs. However, these cost increases are usually not directly reflected in house prices. Instead, they are influenced by broader economic dynamics, such as inflation.
Complex Dynamics:
- Construction Costs: Imported materials and energy costs may be affected by exchange rates.
- Indirect Effects: Cost increases may be reflected in house prices through the inflation channel.
Conclusion:
The impact of exchange rate changes on house prices is complex and indirect rather than direct. Land and construction costs depend heavily on local factors, while exchange rate changes can have indirect effects on imported inputs used in the construction process. To understand this complex relationship, it is necessary to consider the full range of economic factors.
Frequently Asked Questions (FAQs)
1. How do exchange rate changes affect housing prices?
Exchange rate changes can have indirect effects on imported materials and energy costs, especially those used in the construction process. However, these effects are usually reflected in house prices through economic dynamics such as inflation, rather than directly.
2. Are land prices affected by the exchange rate?
Land prices are not directly affected by the exchange rate, as they are usually determined by local zoning practices and regional conditions.
3. How do construction costs increase?
When the exchange rate rises, the cost of imported materials and energy can increase construction costs. However, these increases are usually indirectly reflected in house prices through inflation.
