Abstract
The COVID-19 (also called “SARS-CoV-2”) pandemic is causing a dramatic reduction in consumption, with a further drop in prices and a decrease in workers’ per capita income. To this will be added an increase in unemployment, which will further depress consumption. The real estate market, as for other productive and commercial sectors, in the short and mid-run, will not tend to move independently from the context of the aforementioned economic variables. The effect of pandemics or health emergencies on housing markets is an unexplored topic in international literature. For this reason, firstly, the few specific studies found are reported and, by analogy, studies on the effects of terrorism attacks and natural disasters on real estate prices are examined too. Subsequently, beginning from the real estate dynamics and economic indicators of the Campania region before the COVID-19 emergency, the current COVID-19 scenario is defined (focusing on unemployment, personal and household income, real estate judicial execution, real estate dynamics). Finally, a real estate pricing model is developed, evaluating the short and mid-run COVID-19 effects on housing prices. To predict possible changes in the mid-run of real estate judicial execution and real estate dynamics, the economic model of Lotka–Volterra (also known as the “prey–predator” model) was applied. Results of the model indicate a housing prices drop of 4.16% in the short-run and 6.49% in the mid-run (late 2020–early 2021).
Highlights
COVID-19 is an ongoing pandemic of coronavirus disease 2019, caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2)
To valuate, in the medium term, change in the real estate dynamics of the Campania region (IMI index, a specific market intensity indicator provided by Italian Revenue Agency, obtained as the ratio between the number of houses sold and the available stock of houses on the real estate market), the economic model of Lotka–Volterra was used (Freedman 1980; Brauer and Castillo-Chavez 2012; Lotka 1925; Volterra 1926; Volterra 1931)
While judicial execution procedures signal to homeowners that housing demand may be in decline and are often both a cause and a consequence of a depressed real estate market: forecasts of our model indicate that a 1% change in JEX variable can induce only a 0.07% of variation in housing price
Summary
COVID-19 is an ongoing pandemic of coronavirus disease 2019, caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). Only a few different possible scenarios can be proposed: the pre-virus one, for which we were preparing but was overcome by the events, a soft scenario and a pessimistic one, the latter in which the unemployment rate could increase exponentially In such a changing scenario, such as the one marked by the current health and economic emergency in progress, the only way to make predictions is to proceed by hypothesis. In line with these perspectives, our aim is to provide a short and mid-run forecast of housing prices in the Campania region (Italy), beyond the levels that can be estimated from cyclical housing market downturns. A real estate pricing model is proposed, evaluating the short and mid-run effects on housing prices
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