Of fake housing bubbles and Syrian refugees

I am often asked about the housing prices in Turkey lately. My questioners often want to confirm their sense that the housing bubble is going to burst, that a year or two down the line and they’ll be able to say “I told you so.” Have a look at the table below. It shows the increase in housing prices across Turkey between January 2010 and May 2014. The data was collected and released by TURKSTAT. So unless there is something terribly wrong with my eyes, there is no housing bubble in the data. I do, however, see Syrian refugees having a considerable impact. Let me elaborate.

Housing prices have increased around 60 percent between January 2010 and May 2014, but the increase is due to a few, clustered spikes on the map. Those are in the provinces of Gaziantep, Kilis and Adıyaman, with a 125 percent surge in housing prices in the last 5 years. All three provinces are on the Syrian border. Kilis has a population of around 80,000 and has so far taken in a refugee population of 125,000. In Gaziantep, the refugee-to-native ratio is still at a more modest four-to-one. Two factors are important here – the number and wealth of the refugees. In places where newcomers are relatively well off, housing prices increase more. So if you look for an impact of Syrian refugees in Turkey, it is now also good to have a look at the prices of houses.     

Secondly, if you look at housing prices in 2014, there is an annual 20 percent increase. That might seem high, but remember that this is a country with a 10 percent inflation rate. When compared with the Economist’s housing price index in 20-something countries, it hardly looks like bubble trouble to me.

Thirdly, however, there is a regulatory restraint on loan growth nowadays. Turkey has had a...