Housing Market in the Time of Pandemic: A Price Gradient Analysis from the COVID-19 Epicentre in China

Ka Shing Cheung,Chuyi Xiong,Chung Yim Yiu

doi:10.3390/jrfm14030108

Ka Shing Cheung, Chuyi Xiong + Show 1 more

Open Access

https://doi.org/10.3390/jrfm14030108

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Abstract

While the outbreak of the COVID-19 disease has caused asset markets to experience an unprecedented spike of risk and uncertainty worldwide, the real estate market in many global cities appears to be immune to the adverse effects. How does COVID-19 affect urban housing markets? This study is a first attempt to identify the pandemic’s impact on house prices by applying a price gradient analysis to the COVID-19 epicentre in China. Considering microlevel housing transaction data in 62 areas from nine districts in Wuhan City from January 2019 to July 2020, the hedonic pricing and the price gradient models suggest that there was, respectively, a 4.8% and a 5.0–7.0% year-on-year fall in house prices immediately after the pandemic outbreak. Although house prices rebounded after the lockdown period, the gradient models show that the price gradients were flattened from the epicentre to the urban peripherals. The price premiums in high-density areas were also substantially discounted after the city’s lockdown. Our findings are robust to different model specifications. The implication is that the risk associated with the pandemic is localised and transitory in nature. People may be able to internalise the risk by residing in low-density residential areas.

Highlights

Management 14: 108. https://A contagious disease, commonly known as the coronavirus disease (COVID-19 or SAR-COV-2), was first reported in the Wuhan Huanan seafood market in late 2019(World Health Organization 2020)
At the time of writing, had it led to over-million deaths, but the socioeconomic costs had already exceeded those in the global financial crises (United Nations Office for Disaster Risk Reduction UNODRR)
This study found that the COVID-19 epidemic had a slightly negative effect on house prices but a strong negative effect on transaction volume

Summary

Introduction

The spread of the disease led to an ongoing pandemic across the world. Governments worldwide imposed national or local area lockdown orders to restrict business operations and required households to “stay-at-home” for social distancing to limit interactions and curtail the spread of the virus. At the time of writing (early 2021), had it led to over-million deaths, but the socioeconomic costs had already exceeded those in the global financial crises (United Nations Office for Disaster Risk Reduction UNODRR). This health emergency has affected almost every sector of all economies

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