The Impact of Inflation and Exchange Rate on Housing Prices: Evidence from Bootstrap ARDL with Sharp and Smooth Structural Breaks

This study examines the relationship between housing prices, inflation, and the real effective exchange rate in Türkiye using monthly data from 2010:01 to 2025:03. The Bootstrap ARDL approach, which allows for both sharp and smooth structural breaks, was employed to test for long-run and short-run dynamics among the variables. The results confirm a significant long-run cointegration relationship, indicating that a 1 percent appreciation in the real effective exchange rate decreases housing prices by about 1.95 percent, while a 1 percent increase in inflation raises them by approximately 0.743 percent. The negative and statistically significant error correction term shows that short-term deviations adjust gradually toward long-run equilibrium. These findings suggest that inflationary pressures increase housing demand as investors seek real assets to hedge against inflation, whereas currency appreciation dampens demand and lowers prices. Overall, the results highlight that the housing market in Türkiye is highly sensitive to macroeconomic conditions, particularly inflation and exchange rate movements, underscoring the importance of macroeconomic stability for sustainable housing market development.