Is this time the same? Housing market performance during SARS and COVID-19*

Abstract

Purpose This paper aims to examine the housing market responses to two outbreaks of respiratory diseases in Hong Kong during the Information Era – the 2003 SARS and COVID-19 outbreaks. Design/methodology/approach The authors first investigate the aggregate housing price changes during SARS and COVID-19. Next, the authors conduct a battery of univariate analyses pertaining to the relationship between district-level housing price movements and geographic and demographic patterns during the pandemic periods. Finally, to shed light on the housing price dynamics at the micro level, the authors conduct an estate-level analysis with the data of 234 residential estates from 2003 to 2020, focusing on the impacts of SARS and COVID-19 on the idiosyncratic volatility of residential estates. Findings Overall, SARS and COVID-19 outbreaks are negatively associated with housing prices. However, unlike SARS, the impact of COVID-19 on housing prices was moderate and transient. The geographic imbalances of the epidemic-induced underperformance are observed at the district and estate levels. Finally, the estate-level analysis presented in this paper indicates that the average idiosyncratic volatility of residential estates is 1.5% higher during the SARS period but 3.7% lower during the COVID-19 period. Lower volatility during COVID-19 is likely explained by household learning from the SARS period. Practical implications Regulators and investors could resort to efficient information disclosure to attenuate idiosyncratic volatility's adverse impact on housing market returns. Originality/value To the best of the authors’ knowledge, the authors are among the first to examine housing market responses to the 2003 SARS and COVID-19 outbreaks using the Hong Kong housing market as a laboratory.