An expert on house pricing in historical pandemics told a conference yesterday that the outlook for real estate valuations in the current crisis mainly depends on the availability of treatments and vaccines for COVID-19.
Marc Francke, professor real estate valuation at the University of Amsterdam, said in a keynote address at the first-ever online IPE Real Estate Conference & Awards 2020: “So what’s the outlook for the residential market? I really don’t know, but up to now there has been no impact on prices – house prices were still increasing in the first half of 2020, at least in the Netherlands, by 5.5%.”
Francke was concluding his presentation at the virtual event of research into the multiple outbreaks of plague in Amsterdam in the 17th century – which wiped out 10% of the population – and the spread of cholera in Paris in the second quarter of the 19th century.
Painstaking examination of housing market records from both periods revealed that in both periods, the epidemics coincided with a subsequent fall in house prices, though a decline in rent prices was less visible.
In his forward-looking conclusion, the academic said: “What will happen in the coming years I think will heavily depend on when we are able to get treatment and vaccines for COVID 19.
“If COVID 19 continues for a while, more people will lose their jobs, government aid will likely be less generous and that will have an impact on house prices,” he said.
But on the other hand, Francke said, interest rates were currently low and there was a shortage of supply especially in urban areas, which, he said would not be solved in the short run.
“Also housing preferences may change, and people may move to more rural areas,” he said.
Francke emphasised that there were many limits to his research on house prices during the plague and cholera outbreaks of previous centuries, not least because of the source material available for the historical events.
He also said the differences between these periods and the current phase were more significant than the similarities, partly because mortality rates had been so much higher back then.
However, Francke’s data showed that both the Paris and Amsterdam health crises had coincided with a huge increase in the urban population.
Asked whether there were any policy lessons to be learned from his research, Francke said: “I do recommend that we invest in housing supply as much as possible, also in this crisis time.”
