By Homogram | Real Estate Insight | July 2025
Land is no longer just an asset—it’s a speculative gateway. At Homogram, we explore how real estate has become a central node in Türkiye’s economic volatility. Drawing from the 2025 NBER framework by Hirano and Stiglitz, we examine Türkiye’s macroeconomic dynamics through the lens of land speculation, sectoral credit allocation, and their implications for growth and stability.
The Model: Real Estate in a Fragile Equilibrium
The Hirano-Stiglitz OLG model introduces “wobbly dynamics” to explain how economies with overlapping generations, land speculation, and credit frictions are prone to multiple equilibria and sudden stagnation. Türkiye’s economic structure — characterized by high credit-to-GDP and disproportionate investment in real estate — fits this model with alarming precision.
Türkiye’s Real Estate Dominance: Credit, Prices, and Permits
Türkiye’s credit expansion over the past decade has overwhelmingly favored the real estate sector. This misallocation of capital has distorted growth metrics, leading to what we term a “speculative GDP effect” — a facade of growth driven by rising asset prices rather than productive output.
Figure 1 shows a comparative line graph demonstrating the inverse relationship between accelerating real estate prices and declining GDP growth. This visual captures the crowding-out of productive investment by speculative land markets, as theorized in the Hirano-Stiglitz framework.
Figure 1. GDP Growth vs Land Prices in Turkey (2010–2024)
Figure 2 shows a dual-line chart illustrating how credit to real estate has consistently surpassed credit to manufacturing. This sustained imbalance reflects the persistent credit misallocation at the heart of the Hirano-Stiglitz model, underscoring the vulnerability of Türkiye’s growth strategy to speculative investment dynamics.
Figure 2. Sectoral Credit Allocation in Turkey (2010–2024)
Real estate not only attracts more than 50% of private credit in some years, but construction permits surged during periods of speculative fervor (e.g., 2013, 2017, 2021), indicating herd behavior among developers and financial institutions.
Implications for Economic Resilience
This structural overexposure to real estate creates several vulnerabilities:
- Growth Illusions: Rising land prices inflate GDP metrics without increasing productivity.
- Crisis Amplification: Sharp corrections in land markets trigger banking instability.
- Underinvestment in Industry: Manufacturing, tech, and exports lose access to capital.
These dynamics mirror the model’s prediction of fragile, self-reinforcing cycles driven by speculative investment.
Homogram’s Recommendations
To rebalance Türkiye’s growth structure and insulate it from land-driven instability, we propose:
- Strategic Credit Reallocation
Implement credit quotas favoring tradable sectors like manufacturing and technology.
- Speculation Dampeners
Introduce progressive transaction taxes or holding penalties for short-term real estate flips.
- Real Estate Supply Controls
Limit speculative construction permits in overheated zones based on land price growth thresholds.
- Early Warning Systems
Embed predictive models (like Hirano-Stiglitz OLG) into central bank dashboards to identify emerging wobbly dynamics.
Conclusion
Türkiye’s real estate sector is not merely a byproduct of growth—it is shaping the economy’s entire trajectory. While speculative surges have fueled temporary prosperity, they have also exposed the economy to deeper volatility and structural inefficiencies. Aligning credit policy with long-term productivity goals is now an economic imperative.
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