Beyond luck: The key to profitable residential real estate investments for individual investors in Türkiye
DOI:
https://doi.org/10.47818/DRArch.2023.v4i1084Keywords:
home, housing, investment, profit, real estateAbstract
Individual residential investors are influenced by the media and their environment in their investment preferences, as they lack the experience of property investors and professional residential investors. Concerns about regret, fears of further property price rises and social circumstances put pressure on investors. Under these conditions, are individual housing investors seeing all the opportunities in the housing market? What types of buyers are taking advantage of these opportunities? This study aims to create tools to help individual residential investors identify opportunity periods in the market, analyse such opportunities retrospectively and test consumer behaviours in response to these opportunities. We analysed the opportunity for access to housing, the opportunity of lower loan interest rates and the opportunity of lower housing prices in Türkiye in the 120 months between 2013 and 2022 using the income-housing price scale. We analysed residential sales (total, credit and cash) in the opportunity periods resulting from the equations set up for the opportunity periods. We tested the criteria for selecting opportunity periods using the analysis of variation (ANOVA) method. We analysed changes in consumer preferences for credit and cash home purchases during periods of opportunity. We found that residential investors did not use the opportunity of accessing residential properties, and that cash home buyers used the opportunities of residential loan interest rates and residential price declines.
Downloads
References
Alexiou, C., Chan, A. S., & Vogiazas, S. (2019). Homeownership motivation, rationality, and housing prices: Evidence from gloom, boom, and bust-and-boom economies. International Journal of Finance and Economics, 24(1), 437–448. https://doi.org/10.1002/ijfe.1672
André, C., Gil-Alana, L. A., & Gupta, R. (2014). Testing for persistence in housing price-to-income and price-to-rent ratios in 16 OECD countries. Applied Economics, 46(18), 2127-2138. https://doi.org/10.1080/00036846.2014.896988
Bayer, P., Geissler, C., Mangum, K., & Roberts, J.W. (2020) Speculators and middlemen: The strategy and performance of investors in the housing market, The Review of Financial Studies, 33, Issue 11, November 2020, Pages 5212–5247, https://doi.org/10.1093/rfs/hhaa042
Bayer, P., Mangum, K., & Roberts, J. W. (2016). Speculative fever: Investor contagion in the housing bubble (No. w22065). National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w22065/w22065.pdf
Bazerman, M. H. (2001). Consumer research for consumers. Journal of Consumer Research, 27(4), 499-504. https://doi.org/10.1086/319624
Beltratti, A. (2004). Behavioural Finance and Speculative Bubble. Milano: Universita Commerciale Luigi Bocconi.
Ben-Shahar, D., & Warszawski, J. (2016). Inequality in housing affordability: Measurement and estimation. Urban Studies, 53(6), 1178–1202. https://doi.org/10.1177/0042098015572529
Case, K. E., & Shiller, R. J. (1988). The behavior of home buyers in boom and post-boom markets. National Bureau of Economic Research, Working Paper 2748. DOI 10.3386/w2748
Case, K. E., Shiller, R. J., & Thompson, A. (2012). What have they been thinking? home buyer behavior in hot and cold markets. National Bureau of Economic Research, Working Paper 18400. https://doi.org/10.3386/w18400
CBRT, (2023a). Unit Price of Home. Central Bank of the Republic of Türkiye. https://evds2.tcmb.gov.tr/index.php?/evds/serieMarket/collapse_3/5870/DataGroup/turkish/bie_kt100h/ [Date of Access: 10.03.2023]
CBRT, (2023b) Home Price Indices. Central Bank of the Republic of Türkiye. https://evds2.tcmb.gov.tr/index.php?/evds/serieMarket/collapse_3/5870/DataGroup/turkish/bie_kt100h/ [Date of Access: 10.03.2023]
Cesa‐Bianchi, A., Cespedes, L. F., & Rebucci, A. (2015). Global liquidity, house prices, and the macroeconomy: Evidence from advanced and emerging economies. Journal of Money, Credit and Banking, 47(S1), 301-335.
Chang, E. C., Cheng, J. W., & Khorana, A. (1999). An Examination of Herd Behavior in Equity Markets: An International Perspective. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.181872
Chen, Y., Gang, J., Qian, Z., & Zhang, J. (2021). Rationality test in the housing market: Project‐level evidence from China. Journal of Regional Science, 1– 34. https://doi.org/10.1111/jors.12632
Coşkun, Y. (2016a). Türkiye konut piyasasında talep eğilimleri ve bilgi bakışımsızlığına yönelik politika önerileri. Bankacılar Dergisi, Sayı (Vol. 96).
Coşkun, Y. (2016b). Property prices and investment: An analysis for Turkey (Konut fiyatları ve yatırımı: Türkiye için bir analiz). Niğde Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 9(2): 201-217., Available at SSRN: https://ssrn.com/abstract=2760867
D’Lima, W., & Schultz, P. (2021). Residential real estate investments and investor characteristics. Journal of Real Estate Finance and Economics, 63(3), 354–393. https://doi.org/10.1007/s11146-020-09771-8
De Bondt, W. F. (1998). A portrait of the individual investor. European Economic Review, 42(3-5), 831-844. https://doi.org/10.1016/S0014-2921(98)00009-9
De Bruin, A., & Flint-Hartle, S. (2003). A bounded rationality framework for property investment behaviour. Journal of Property Investment & Finance, 21(3), 271–284. https://doi.org/10.1108/14635780310481685
Demographia. (2012). 8 th Annual Demographia International Housing Affordability Survey: 2012 Ratings for Metropolitan Markets. http://www.demographia.com/dhi2012.pdf
Erdoğdu, C., & Büyükduman, A. (2018). Sorularla Gayrimenkul Yatırımı. Ceres Yayınları.
Fu, Y., & Qian, W. (2014). Speculators and price overreaction in the housing market. Real Estate Economics, 42(4), 977-1007. https://doi.org/10.1111/1540-6229.12071
Gallimore, P., & Gray, A. (2002). The role of investor sentiment in property investment decisions. Journal of Property Research, 19(2), 111–120. https://doi.org/10.1080/09599910110110671
Henderson, J. V., & Ioannides, Y. M. (1983). A model of housing tenure choice. The American Economic Review, 73(1), 98–113. http://www.jstor.org/stable/1803929
Holtemöller, O. & Schulz, R. (2010). Investor rationality and house price bubbles: Berlin and the German reunification. German Economic Review, 11(4), 465-486. https://doi.org/10.1111/j.1468-0475.2009.00499.x
Hulchanski, J. D. (1995). The concept of housing affordability: Six contemporary uses of the housing expenditure‐to‐income ratio. Housing Studies, 10(4), 471-491. DOI: 10.1080/02673039508720833
Jewkes, M. & Delgadillo, L. (2010). Weaknesses of housing affordability indices used by practitioners. Journal of Financial Counseling and Planning, Vol. 21, No. 1, https://ssrn.com/abstract=2222052
Katz, E. (2006). Rediscovering Gabriel Tarde, Political Communication, 23:3, 263-270, DOI: 10.1080/10584600600808711
HPI, (2022) Residential Property Price Indice. [Date of Access: 10.03.2023]
Koklic, M.K., & Vida, I. (2014). A strategic household purchase: Consumer house buying behavior. Managing Global Transitions, 7(1), 75-96 https://www.researchgate.net/publication/227458004
Lorig, M., & Suaysom, N. (2022). Optimal times to buy and sell a home. https://doi.org/10.48550/arXiv.2203.05545
Lux, M., Gibas, P., Boumová, I., Hájek, M., & Sunega, P. (2017). Reasoning behind choices: Rationality and social norms in the housing market behaviour of first-time buyers in the Czech Republic. Housing Studies, 32(4), 517–539. https://doi.org/10.1080/02673037.2016.1219331
Newman, K., (2010). Affordable housing. Encyclopedia of Urban Studies. Sage Publications. https://doi.org/10.4135/9781412971973
Paris, C. (2007). International perspectives on planning and affordable housing, Housing Studies, 22(1), 1-9.
Richards, A. (2008, March). Some observations on the cost of housing in Australia. In address to the Melbourne Institute and The Australian Economic and Social Outlook Conference,‘New Agenda for Prosperity’, Melbourne (Vol. 27).
Robinson, M., Scobie, G. M., & Hallinan, B. (2006, March). Affordability of housing: Concepts, measurement and evidence. New Zealand Treasury, Working paper 06/04.
Shiller, R. J. (1995). Conversation, information, and herd behavior. The American economic review, 85(2), 181-185.
Shiller, R. (1998). Human Behavior and the Efficiency of the Financial System. https://doi.org/10.3386/w6375
Shiller, R. J. (2015). Irrational Exuberance. Princeton University Press. https://doi.org/10.1515/9781400865536
Simon, H. A. (1955). A behavioral model of rational choice. The Quarterly Journal of Economics, 99-118. https://doi.org/10.2307/1884852
Sliogeris, E., Crabtree, L., Phibbs, P., Johnston Professor Phillip, K. O., & Director, N. (2008). Housing affordability literature review and affordable housing program audit. Urban Research Centre, University of Western Sydney. https://researchdirect.westernsydney.edu.au/islandora/object/uws:11827/datastream/PDF/view
Tarde, G. (1901). L’opinion et la foule. Paris: Presses Universitaires de France.
TCSG, (2023). Yıllar itibariyla net ve brüt asgari ücretler. https://www.csgb.gov.tr/media/35787/yillar-itibariyle-net-brut-asgari-ucretler.pdf [Date of Access: 10.03.2023]
Topçu, M., Topçu, K., & Kubat, A. S. (2007). Movement economy dependent on urban design. In Proceedings of 6th International Space Syntax Symposium, Istanbul.
Triantafyllopoulos, N., & Kandyla, T. (2010). Buyers’ behaviour and the housing bubble in Greece. In 17th Annual European Real Estate Society Conference, Milan, June (Vol. 23). https://eres.org/eres2010/contents/papers/id36.pdf
TUIK, 2023a. Home Sales. Turkish Statistical Institute. https://data.tuik.gov.tr/Bulten/Index?p=Konut-Satis-Istatistikleri-Aralik-2022-49526 [Date of Access: 10.03.2023]
TUIK, 2023b. Number of Households. Turkish Statistical Institute. https://data.tuik.gov.tr/Bulten [Date of Access: 10.03.2023]
TUIK, 2023c. Home Ownership. Turkish Statistical Institute. https://data.tuik.gov.tr/Bulten/Index?p=Gelir-ve-Yasam-Kosullari-Arastirmasi-2021-45581 [Date of Access: 10.03.2023]
TUIK, 2023d. Construction Permits, 2002-2022. Turkish Statistical Institute. https://data.tuik.gov.tr/Bulten [Date of Access: 10.03.2023]
Yates, J., Milligan, V., Berry, M., Burke, T., Gabriel, M., Phibbs, P., Pinnegar, S., Randolph, B., Arthurson, K., Gurran, N., Jacobs, K., Kendig, H., & Phillips, B. (2007). Housing affordability: a 21st century problem National Research Venture 3: Housing affordability for lower income Australians authored by. Australian Housing and Urban Research Institute. https://apo.org.au/sites/default/files/resource-files/2007-10/apo-nid2473.pdf
Zorn, T. S., & Sackley, W. H. (1991). Buyers' and sellers' markets: A simple rational expectations search model of the housing market. The Journal of Real Estate Finance and Economics, 4, 315-325. https://doi.org/10.1007/BF00161932
Downloads
Published
Issue
Section
License
Copyright (c) 2023 Celal Erdogdu
This work is licensed under a Creative Commons Attribution 4.0 International License.
