How Does the COVID-19 Pandemic Affect Housing Market? Evidence from Shanghai, China

Abstract

We examine the effect of the COVID-19 pandemic on the housing market in Shanghai, China. We employ a difference-in-differences hedonic approach and find that the COVID-19 pandemic significantly affects housing prices. Housing prices in infected communities decrease by 0.7% after the pandemic. The price effects are more pronounced for housing with smaller size, lower value and in an urban location. We further study the mechanisms and find that the COVID-19 pandemic lowers housing listing prices, extends the time-on-the-market and changes households’ preferences for housing and migration behavior. Our study suggests that the pandemic has contagion and distributional effects on the housing market. The pandemic increases the gap of housing wealth between homeowners in low-valued and high-valued housing.