Impact of major public health events on inter-city connectedness and cross-regional spillover of housing prices

The COVID-19 pandemic has significantly impacted China’s economy and society, posing a great challenge to the stable operation of the real estate market. Identifying, quantifying, and assessing the potential risks in the real estate market based on the experience of such major public health events is significant for maintaining economic stability and social development in the post-pandemic era. This paper uses the second-hand housing price index of 38 major cities in China, applies the large time-varying parameter vector autoregression model to quantify the level of city housing price volatility spillover, and constructs a time-varying complex network of city housing price volatility spillover to analyze the changes and mechanisms of housing price volatility spillover levels in China under the pandemic shock. The results show that the negative effect of the pandemic shock on overall connectedness gradually dissipated and became positive after approximately 40 weeks. At the same time, the shock significantly reduced the city housing price volatility cross-regional spillover level. Mechanism analysis reveals that the impact of the COVID-19 epidemic on city housing price volatility is mainly affected by urban population mobility and the psychological and behavioral factors of market participants. This paper offers suggestions for improving the supervision and prevention of systemic risks induced by city housing price connectedness during major public health events, contributing to “guarding against systemic risks” and providing useful implications for improving China’s real estate market risk monitoring.