Measuring COVID-19 Effects in the Austrian Housing Market Using Hierarchically Structured Hedonic Models

We use a large sample of residential dwellings transactions to test for a variety of changes in the Austrian real estate market triggered by the COVID-19 pandemic. To account for the country's heterogeneous topography as well as degree and type of economic activity, we build hierarchically structured hedonic pricing models. We strategically expand these models by various direct and indirect COVID-19 measures and check their importance over several phases of the pandemic. We find strong co-movement of residential real estate prices with the intensity of the pandemic measured via the timing of strict lock-downs, incidence rates and mobility rates. After a severe downturn of prices and quantities during the first lock-down, both measures recovered rapidly and followed largely accelerating trends thereafter. In addition to that, the pandemic led to relative changes across different segments of the Austrian residential real estate property market: Apartments not offering some kind of open space lost in value as compared to those having access to such amenities. The degree of relative value loss is significant from the second lock-down onward. Between the start of the pandemic and 28 February 2022 the total relative gap in prices amounts to 11.61 percentage points.