THE EXCHANGE RATE EFFECT ON HOUSING PRICE INDEX AND REIT INDEX RETURN RATES

Abstract

Real estate is an important investment instrument, and homeownership has always been considered as a valuable investment tool in Turkey. Real Estate Investment Trusts (REITs) are one of the first real estate investment instruments that the Capital Market Board of Turkey (SPK) legally regulated. The exchange rate is an important factor that affects many industries including real estate, especially in emerging economies. This macroeconomic economic factor became more important for Turkish housing and real estate industries after the law issued in 2013 that enabled foreigners to purchase housing units in Turkey. The aim of this research is to examine the effect of exchange rates (USD/TL) on the return rates of REIT and housing sales price indices by using time series analysis covering the monthly period of January 2004-December 2016. VAR econometric model is used to test the effect of the exchange rates on the return rates of both indices, and Augmented Dickey-Fuller and Granger Causality Tests were also employed. The results of the study exhibited that while REIT index return rate is affected by exchange rates, there is no statistically significant effect of exchange rates on housing sales price return rates. This result may affect the perception of the investors about considering housing as an investment tool in Turkey and open a new discussion for alternative future retirement plans that may combine different real estate-based investment instruments.