Convergence of residential property prices in the Szczecin agglomeration in the context of the COVID-19 pandemic

Abstract

The outbreak of the COVID-19 pandemic has left a great mark on all of humanity. In addition to the immediate threat to health and life, the virus in a way also infected other spheres of human life. The lockdowns, which lasted for many weeks, had a very big impact on various sectors of the economy. Most of them experienced a severe slowdown or recession. However, there were areas that benefited from the fact that the people in many countries stayed at home and worked remotely. Examples of such areas include the computer and tablets market, online stores, and delivery companies. This proves that even in difficult circumstances like a pandemic, we are not facing a total global recession. In such a context, it is worth looking at the impact of the COVID-19 pandemic on the real estate market. This area of the economy can experience the impact of the virus in different ways. On the one hand, a general increase in global uncertainty can cause certain investment projects to freeze or be abandoned. Lockdowns cause difficulties in accessing workers at construction sites. Populations losing their jobs during a pandemic have difficulty paying rent or mortgage payments. On the other hand, rising inflation and low interest rates on bonds and bank deposits may encourage people to protect their savings by buying property. Remote working increases the demand for larger apartments that need to serve as offices in addition to residential functions. Remote work also means not having to commute to workplaces, which may encourage people to move to cheaper locations without having to give up a well-paying job in a larger but also more expensive city. These two groups of impulses are contradictory and may have a completely different impact on the shape of the real estate market understood as the structure of prices and the number of transactions concluded. The study is part of a broader research effort to assess the impact of the COVID-19 pandemic on various areas of the economy. Previous research conducted in the Szczecin agglomeration proved the existence of the price divergence phenomenon. The main city of the agglomeration showed a tendency to pull in the economic potential from the region, which translated into a faster increase in real estate prices in the capital of the region in comparison with the surrounding cities. The aim of this study is to verify whether the pandemic and the socio-economic processes triggered by it, such as the development of remote working, changed the process of divergence into a process of convergence, but whether the faster growth of residential property prices in the main city of the agglomeration, which started years ago, has not been stopped. For this purpose, α-convergence and σ-convergence models were used. The study covers the period 2015-2021. The study area is the city of Szczecin and the four largest cities adjacent to the capital of the West Pomeranian Voivodeship in Poland.