Impacts of monetary policy on housing prices in five emerging economies during the Covid-19 pandemic

• Date: 25 July 2023
• Pages: 48-69
• DOI: https://doi.org/10.1108/IJHMA-04-2023-0057
• Published date: 25 July 2023
• Subject Matter: Property management & built environment,Real estate & property,Housing markets
• Author: Trung Ba Nguyen,Chon Van Le

Impacts of monetary policy on

housing prices in f‌ive emerging

economies during the

Covid-19 pandemic

Trung Ba Nguyen and Chon Van Le

Department of Economics, International University,

Vietnam National University –Ho Chi Minh City, Ho Chi Minh City, Vietnam

Abstract

Purpose –This paper aims to examine thedynamic impacts of the COVID-19 pandemic and government

policy on real house price indices in f‌ive emerging economies,namely, Brazil, China, Thailand, Turkey and

South Africa.

Design/methodology/approach –The authors use the local projectionmethod with a panel data set of

these countriesspanning from January 2020 to July 2021.

Findings –The number of COVID-19 conf‌irmed positivecases raised housing prices, whereas government

containment measures reduced them. Both conventional and unconventional monetary policy implemented

by central banks to cope withthe COVID-19 helped increase housing prices. These effectswere strengthened

by the US monetarypolicy via globalized f‌inancial markets.

Originality/value –First, while previous researches typically concentrated on developed countries, the

authors investigate emerging economies where proportionally more people were badly affected by the

pandemic. Second, a panel dataset of f‌ive emerging economies enabled the authors to examine the dynamic

effects of the COVID-19 crisis on housingprices. Third, to the best of the authors’knowledge, this is the f‌irst

study evaluating the inf‌luences of easing monetarypolicy on housing prices in emerging economies during

the pandemic.

Keywords COVID-19 pandemic, Monetary policy, Housing prices, Emerging economies

Paper type Research paper

1. Introduction

Although the COVID-19 pandemic has been contained by the introduction of effective

vaccines, its rapid spread before then to over 200 countries and territories has created an

unprecedented global crisis. Since its outbreak, there have been more than 761 million

cumulative cases reported to the World Health Organization (WHO), of which nearly 7

million lost their lives. Apart from the human suffering, the pandemic triggered severe

disruptions in almost every facet of life as countries imposed tight restrictions on

movement. Supply chain interruptions have caused severe shortages of goods and

services, and widespread layoffs which have put numerous households into hard times

(UNCTAD, 2022).

JEL classif‌ication –E52, R30, R38

The authors acknowledge f‌inancial support from the Vietnam National University, Ho Chi Minh City

under the research project B2022-28-05.

Conf‌lict of interest: The authors declare that they have no conf‌lict of interest.

IJHMA

18,1

48

Received20 April 2023

Revised27 June 2023

Accepted3 July 2023

InternationalJournal of Housing

Marketsand Analysis

Vol.18 No. 1, 2025

pp. 48-69

© Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-04-2023-0057

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1753-8270.htm

A large body of literature has developed to assessthe adverse impacts of the COVID-19

pandemic on economic and f‌inancial activitiesaround the world, for example, output (Altig

et al., 2020;Baker et al., 2020b;Ludvigson et al.,2021), consumption (Baker et al., 2020c;

Binder, 2020;Chang and Meyerhoefer, 2021;Liuet al., 2020), global supply chain (Eppinger

et al.,2020), global trade (Vidya and Prabheesh, 2020), stock markets (Al-Awadhi et al., 2020;

Baker et al., 2020a;Gil-Alana and Claudio-Quiroga, 2020;Phan and Narayan, 2020;Topcu

and Gulal, 2020), f‌irm and industry performances (Shen et al.,2020) and exchange rate

market (Garg and Prabheesh,2021).

Traditionally, homeownership is the single largest investment that most households of

various demographic groups across different countries ever make. It is considered their

most important source of wealth accumulation and f‌inancial security for several reasons.

Homes can be used as collateral for bank loans, providing easy access to formal credit at

lower interest rates. Long-run home price appreciation allows homebuyers to cover the

transaction costs associated with the purchase of a home. Buying a home which is an

economic status symbol should increase an individual’s life satisfaction. Security of tenure

which is not enjoyed by renters may lead to less stressful life and improve homeowners’

psychological and physical health. In addition, since homeowners are likely to take better

care of their properties and move less frequently, homeownership is thought to promote

social stability, social involvement and socially desirable behaviors(Rohe et al.,2013). As a

result, a number of public policies have been designed to correct real estate market failures

and foster affordable,quality housing for people (Causa et al., 2019).

However, housing wealth is characterized by high volatility caused by large swings in

house prices relative to housing fundamentals. During the COVID-19 pandemic,as millions

of employees lost their jobs, declines in housing prices, if any, were expected to strongly

affect households in emerging economies, especially those who lived marginally above the

poverty line. Due to under-developedsafety nets, their homes’decreasing values seemed to

intensify their f‌inancialhardship.

Therefore, the impact of the pandemic on housing priceshas attracted a lot of academic

attention. But relevant studiesare far from conclusive. Most of them found a negative effect

of the COVID-19 pandemic on housing prices, while others (Bhat et al.,2023) found the

opposite. And actual data indicate a rising trend in housing prices during the coronavirus

crisis (Figure 2). The conf‌licting results may be attributed to two main reasons. First, most

researchers used cross-sectionaldata in their investigations. This approach is valid but does

not take into account the dynamic effects of the COVID-19 pandemic on housing prices.

Second, they often ignored the role of government policies.During the pandemic, advanced,

emerging and developing countries allimplemented a large number of measures to contain

the spread of the coronavirus such as social distancing, quarantine and lockdown and to

mitigate devastating economic consequences such as accommodating monetary policy. If

these government resolutions are not properly considered, empirical results might be

misleading (Ducaand Murphy, 2021).

This paper is to answer two questions: how the COVID-19 pandemic affected housing

prices in emerging economies, and whether easing monetary policy during the coronavirus

crisis was effective in boosting housing prices in emerging economies. Our study

contributes to the current literature in several ways. First, whereas previous researches

usually focused on developed countries, we examine emerging economies where

proportionally more people were badly hit by the crisis. Second, a panel data set of f‌ive

emerging economies allowsus to analyze the dynamic effects of the COVID-19 pandemic on

housing prices. Third, to the best of our knowledge, this is the f‌irst study investigatingthe

Impacts of

monetary

policy

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