Applied Economics Letters

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The impact of COVID-19 on the housing market:

evidence from the Yangtze river delta region in
China

Minhua Yang & Junni Zhou

To cite this article: Minhua Yang & Junni Zhou (2021): The impact of COVID-19 on the housing
market: evidence from the Yangtze river delta region in China, Applied Economics Letters, DOI:
10.1080/13504851.2020.1869159

To link to this article: https://doi.org/10.1080/13504851.2020.1869159

Published online: 07 Jan 2021.

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APPLIED ECONOMICS LETTERS
https://doi.org/10.1080/13504851.2020.1869159

ARTICLE

The impact of COVID-19 on the housing market: evidence from the Yangtze river
delta region in China
Minhua Yang and Junni Zhou
School of Economics and Management, Shanghai Maritime University, Shanghai, China

ABSTRACT KEYWORDS
We investigate the impacts of COVID-19 on the housing market in the Yangtze river delta region in COVID-19; Housing prices;
China. We divide data into the groups of the municipality directly under the central government Emerging market; Effective
(first-tier city) and other provinces (second- and third-tier cities), and use average selling price of control
commercial housing to capture the performance of local housing market. The findings suggest JEL CLASSIFICATION
significantly positive impacts of COVID-19 on housing price in this region, which implies the urgent E44; R21; R31.
needs of housing for families to stay together during the epidemic. The municipality directly under
the central government (also the first-tier city) usually tends to have higher housing prices due to
better economic and medical conditions and urban governance there, while such impacts shrink in
the period of epidemic, implying the effective control of housing price there, which provides
relevant policy guidance for other provinces and non-first-tier cities.

I. Introduction
In the early 2020, the COVID-19 led Chinese econ­
omy to a semi-standstill and had significant impacts
on the housing market. Medical measures, such as
the quarantine at home and the postponement of
the resumption of work, have stopped the signing of
housing contracts on site, deteriorated the liquidity
of selling commercial houses and therefore have
affected the housing prices across the country. For
example, during the epidemic, a phased pattern is
observed for the housing prices in the Yangtze River
Delta, with the first decline and then rise.
The public health and medical literature offers
rich evidence of how pandemics developed, spread
and how the containment and vaccination policies
emerged (Girard et al. 2010). The factors and
effects of medical measures have also been
a significant focus of the literature (Brien, Kwong,
and Buckeridge 2012). Extant literature has also
examined the social and economic impacts of influ­
enza pandemics (Wong 2008; Brown et al. 2010;
Peckham 2013). Wong (2008) suggests that the
average price in Hong Kong declines by 1–3% if
an estate is directly affected by SARS. In the context
of the COVID-19, Nicola et al. (2020) offer
a general review of how the pandemic has impacts
on industries and sectors of the economy. Other
studies have investigated the impacts of COVID-19
on the stock market (Harjoto, Rossi, and Paglia
2020; Cao et al. 2020), unemployment rate (Bauer
and Weber 2020) and theme park attendance
(Gabe 2020). The link between COVID-19 and
housing prices in the emerging market seems to
be under-researched so far, which comes to our
theoretical contribution.
We develop an empirical research to fill in such
research gap, and the contribution of this paper is
two-folded. First, we examine the impacts of
COVID-19 on housing market in the Yangtze river
delta region in China and observe significantly posi­
tive impacts there. This may be due to the necessary
medical measures of self-isolation and reduced close
contact, making owning a home more important
during the epidemic. Second, we analyse the effects
of COVID-19 on housing market for the munici­
pality directly under the central government and
provinces (as well as for the first-tier city and other
cities). The findings suggest significantly negative
(positive) impacts for the municipality directly
under the central government/first-tier city (other
provinces or cities) during the epidemic, implying
the effective control of housing price there.

CONTACT Minhua Yang mhyang@shmtu.edu.cn, School of Economics and Management, Shanghai Maritime University, Pudong, Shanghai 201306, China
© 2021 Informa UK Limited, trading as Taylor & Francis Group
2 M. YANG AND J. ZHOU
II. Data and methodology
Data
We hand-collected data of housing prices of 16
major cities in the Yangtze river delta region from
the Fangtianxia.com over the time period of
2013–2020. We select the Yangtze river delta as
our target as the region includes provinces and
city (Jiangsu, Zhejiang, Anhui and Shanghai). The
Yangtze river delta region plays a strategic role in
the national modernization and opening up, and is
an important engine for the economic and social
development in this country. Data of explanatory
variables are extracted from the National Bureau of
Statistics of China and other local Bureau of
Statistics1
Data selected include the monthly performance
of housing market (housing prices), the medical
measure of quarantine (Quarantine), city charac­
teristics (City), the monthly fundamental informa­
tion (Fundamentals) of housing market and
control variables (Control). We exclude observa­
tions with missing values and take natural loga­
rithm for variables before conducting analyses.
Variables
The dependent variable used is housing price
(Housing, average selling price of commercial
housing). We include Quarantine, City, BA, CA,
Land as explanatory variables. Quarantine,
a dummy variable, takes a value of 1 if the observa­
tion occurs after the Quarantine of Wuhan (the
23rd of January, 2020), and 0 otherwise. The closure
of Wuhan city has indeed played a decisive role in
controlling the epidemic, which was a turning
point in growing awareness of epidemic prevention
and control in China. City, a dummy variable,
equals 1 if the city is a municipality directly under
the central government, and 0 otherwise. BA and
CA refer to the construction and completed area of
real estate, respectivly. Land is the land transaction
price for real estate market. We check the lag effects
of control variables and find those are not applic­
able due to multi-collinearity. There are two con­
trol variables used in this paper, real GDP and
1
http://www.stats.gov.cn/.
2
We check other variables related to housing demand and find reliable data source for occupancy rate for the region (other than those for real estates for sale)
are not available in our Bureau of Statistics..
Income2 GDP stands for quarterly Gross Domestic
Product (GDP) and Income refers to quarterly
gross disposable income in this region.
Regression methodology
We investigate the impacts of COVID-19 on the
performance of housing market in the Yangtze
river delta region in China. First, we examine
whether the performance of housing market has
been affected by the epidemic for the municipality
directly under central government and provinces
with the difference in difference (DID) method.
Second, we use sub-samples to investigate whether
there are differences between the results of various
provinces and cities.
X
1 X
1
Housingit ¼ αit þ βt Quarantinet þ γt Cityt
q¼0 c¼0
X
4
þ θit Fundamentalsit
f ¼1
X 2
þ δit Controlit þ εit
c¼1
(1)
where Housingit refers to the housing price, the
performance of the housing market for city/pro­
vince i at time t. εit is the error term.
Summary statistics
Table 1 sketches the picture of the housing market
in the Yangtze river delta region in China. The
mean of Housing and Quarantine in the Yangtze
river delta region in China are 4.0479 and 0.0860,
respectively. On average, the City, BA, CA and
Land observed in this region are 0.0625, 4.4760,
3.8358 and 2.9156, respectively. Panel B shows the
presence of difference of housing prices after epi­
demic for municipality and non-municipality. We
can see significant correlations between housing
prices, quarantine time, city type, the completed
area of housing and land transaction price for real
estate market in Table 2, and there is no multi-
collinearity issue in this paper.
 APPLIED ECONOMICS LETTERS 3

Table 1. Summary statistics.

Panel A: variables Obs. Mean Std. Dev
Housing 1,488 4.0479 0.2117
Quarantine 1,488 0.0860 0.2805
City 1,488 0.0625 0.2421
BA 1,488 4.4760 0.4620
CA 1,488 3.8358 0.2100
Land 1,488 2.9156 0.2542
GDP 1,488 6.3757 0.2140
Income 1,488 4.7216 0.6284
Panel B: variables Mean Comparison
Before quarantine After quarantine Diff. t-stat

Housing 4.0383 4.1499 −0.1116*** −5.76

Municipality Non-municipality Diff. t-stat
Housing 4.0110 4.6006 −0.5895*** −35.18
*** indicates the significance at the 1% level. P-values are in parentheses.

Table 2. Correlation matrix.

Variables Housing Quarantine City BA CA Land
Housing 1.0000
–
Quarantine 0.1478*** 1.0000
(0.00) –
City 0.6741*** −0.0001*** 1.0000
(0.00) (0.99) –
BA 0.0074 0.0271 0.0001 1.0000
(0.77) (0.30) (0.99) –
CA −0.0505* −0.2649*** 0.0001 −0.1222*** 1.0000
(0.05) (0.00) (0.99) (0.00) –
Land 0.1031*** 0.0580** −0.0001 −0.6024*** 0.3409*** 1.0000
(0.00) (0.03) (0.99) (0.00) (0.00) –
*, *** and ** indicate the significance at the 1%, 5% and 10% level. P-values are in parentheses.

III. Empirical results Table 3. Regression results.

Variables Housing
The impacts of COVID-19 on housing market Quarantine 0.0440***
(11.85)
Table 3 shows Quarantine (COVID-19) has posi­ Quarantine*City −0.0171*
(−1.75)
tive impacts (0.0440) on the performance of hous­ City 0.6430***
(29.55)
ing market (Housing) in the Yangtze river delta BA 0.0388***
region, which differs from the results related to (12.18)
CA −0.0509***
SARS in Hong Kong (Wong 2008). The empirical (−9.64)
results on COVID-19 imply the urgent needs of Land −0.0385***
(5.74)
housing to stay together in the epidemic, which
Control variables: GDP and income. Fixed effects: region controlled
changes people’s preference to larger houses and Observations 1488
R2 0.9624
villa. The coefficients for City are positive, which
* and *** indicate the significance at the 1% and 10% level. T-stats are in
shows higher prices observed in the municipality parentheses.
directly under the central government. Such
impacts become negative in the period of epidemic, Sub-sample tests
implies the effective control there, which may pro­
vide relevant policy guidance for other provinces Table 4 shows Quarantine has significant negative
and non-first-tier cities to handle housing prices in impacts on housing prices for Shanghai (the only
the time period of epidemic. The endogeneity issue one municipality directly under the central govern­
of omitting variables has been checked and found ment and also the first-tier city in this region) and
to be not applicable and thus has not been reported positive influences for the Jiangsu, Zhejiang and
in this paper. Anhui (or other non-first tier cities). These results
4 M. YANG AND J. ZHOU

Table 4. Sub-sample tests.

Housing
Municipality directly under central government and provinces 1st-tier city
Variables Shanghai Jiangsu Zhejiang Anhui 1st-tier city 2nd- and 3rd tier city
Quarantine −0.0133* 0.0435*** 0.0573*** 0.0355*** −0.0133* 0.0461***
(−1.76) (8.99) (8.40) (3.19) (−1.76) (12.19)
BA 0.0003 0.0390*** 0.0401*** 0.0420*** 0.0003 0.0397***
(0.04) (9.59) (6.61) (4.31) (0.04) (12.00)
CA −0.0078 −0.0540*** −0.0544*** −0.0484*** −0.0078 −0.0533***
(−0.61) (−8.20) (−5.10) (−3.20) (−0.61) (−9.73)
Land −0.0339** 0.0399*** 0.0683*** 0.0141 −0.0339** 0.0440***
(−2.21) (4.72) (5.31) (0.67) (−2.21) (6.32)
Control variables: GDP and income; Fixed effects: region controlled
Observations 93 837 372 186 93 1395
R2 0.9300 0.9343 0.9171 0.8706 0.9300 0.9343
*, ** and *** indicate the significance at the 1%, 5% and 10% level, respectively. T-stats are in parentheses.

may be due to less liquidity (Genesove and Mayer
2001) and loss aversion (Stein 1995) in the epidemic.
IV. Conclusion
This study investigates the impacts of COVID-19 on
the housing market in the Yangtze river delta region
in China. The main results suggest significantly posi­
tive housing prices after the appearance of COVID-
19 in this region, which imply the urgent needs of
housing to stay together in the epidemic for better
home quarantine. The municipality directly under
the central government (first-tier city) has higher
housing prices due to better conditions and urban
governance there, while such impacts shrink in the
period of epidemic, implying the effective control of
housing price there, which provides relevant policy
guidance for other provinces and non-first-tier cities.
One potential issue of this paper may be the
impacts of decreasing interest rates and reserve
requirements and the large amount of bond issu­
ance nationwide on housing prices after the epi­
demic have not been taken into account, which
could be a research direction in the future.
Disclosure statement
No potential conflict of interest was reported by the authors.
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