by Melih Alsaç
Today, it is a matter of curiosity how economic factors affect the housing market. In this context, the impact of exchange rate changes on housing prices is a frequently discussed topic. However, the relationship between house prices and exchange rates is complex.
Terrain and Structure Determinant:
Land and structure play a key role in determining the price of first-hand housing. In Turkey, land is often limited by zoning practices and local conditions. Moreover, the structure is built with labor and local materials. Therefore, there is no direct link to foreign exchange for land and structure.
Impacts during the Construction Process:
However, some inputs used in the construction process may depend on exchange rates. In particular, imported materials such as energy can affect construction costs. However, this impact is usually indirect and not directly reflected in house prices. An increase in the exchange rate can indirectly affect construction costs by affecting material and transportation costs. In this case, the pass-through of a rise in the exchange rate to house prices is usually through the inflation channel.
Complex and Indirect Effects:
Overall, the impact of exchange rate changes on house prices is complex and indirect. To properly understand this effect, it is necessary to consider the full range of economic factors. Therefore, it is important not to see the relationship between exchange rates and house prices only as a direct effect.
