The Resilience and Realignment of House Prices in the Era of COVID-19

Swiss Finance Institute Research Paper 20-121

Journal of European Real Estate Research (2021), forthcoming

Posted: 3 Dec 2020 Last revised: 23 Feb 2021

See all articles by John V. Duca

John V. Duca

Oberlin College; Federal Reserve Banks - Federal Reserve Bank of Dallas

Martin Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School

Joaquim Montezuma

ISEG - Lisbon School of Economics and Management- University of Lisbon; ImoEconometrics

Date Written: November 11, 2020

Abstract

Purpose:
The article analyzes the effects of the COVID-19 pandemic on house prices.

Design/Methodology/Approach:
We start by discussing the possibility that house price indexes may not fully incorporate the effects of the pandemic as of yet. Against the background of the pandemic, we then analyze economic and behavioral effects affecting house prices. We also discuss how the linkages between tourism and house prices have been affected. We further present evidence of an emerging shift in preferences from urban locations to more peripheral ones.

Findings:
We report variance in the evolution of house prices across countries at the onset of the pandemic, with locations depending heavily on tourism showing slower price appreciation while appreciation has firmed in other places. We argue that the resilience of house prices is due not only to the low interest rate environment and government efforts to support firms and households, but also behavioral factors. In some locations, the price of condominiums has declined relative to the price of detached houses. This could indicate that wealthier households are seeking more space and larger units as a result of the crisis. There is also evidence of a downward pressure on rents, leading to increased price-rent ratios in the U.S.

Originality/Value:
By considering both economic and behavioral factors, this paper provides for a better understanding of the resilience and realignment of house prices at the onset of the COVID-19 pandemic.

Keywords: House prices; COVID-19; Pandemic; Housing demand; Tourism; Behavioral effects

JEL Classification: R21; R31; Z30

Suggested Citation

Duca, John V. and Hoesli, Martin Edward Ralph and Montezuma, Joaquim, The Resilience and Realignment of House Prices in the Era of COVID-19 (November 11, 2020). Swiss Finance Institute Research Paper 20-121, Journal of European Real Estate Research (2021), forthcoming, Available at SSRN: https://ssrn.com/abstract=3737376 or http://dx.doi.org/10.2139/ssrn.3737376

John V. Duca

Oberlin College

Oberlin, OH 44074
United States

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

Martin Edward Ralph Hoesli (Contact Author)

University of Geneva - Geneva School of Economics and Management (GSEM) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Joaquim Montezuma

ISEG - Lisbon School of Economics and Management- University of Lisbon ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

ImoEconometrics ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

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