The COVID-19 pandemic and house price convergence in Poland

Abstract

The effect of the COVID-19 pandemic on price convergence in the housing market is largely unknown. This paper aims to assess the impact of the pandemic on the convergence of sales and rental housing prices. The residential markets in Polish voivodeship capitals were chosen as a case study. The convergence evaluation was based on a local linear version of the log t regression test, which allowed the estimation of a time-varying convergence speed parameter. The causal effect of the pandemic on convergence was examined using a Bayesian structural time series model. The study results revealed that the pandemic led to divergence in the primary sales housing market, growth convergence in the secondary sales housing market, and to a weakening of growth convergence in the rental housing market. Finally, this paper provides the R function logt that enables the running of the local linear and dummy variable log t regression tests. JEL Codes: R20, R31, O47.