House Prices and Rents before and during Coronavirus Pandemic: Evidence from a Matched Dataset in Moscow at the Micro-Spatial Level

Using the dataset of the largest and the most up-to-date Russian aggregator of housing advertisement database Cian.ru, I analyze unit-level housing sale and rental prices in Moscow for 3 periods of 2020: February, right before fall of Russian Ruble and coronavirus spread in Russia, April, 2 weeks after launch of a self-isolation regime in Russia and Moscow, and May, 1 week after Moscow mayor Sobyanin announced a gradual withdrawal of a self-isolation regime. I run hedonic regressions to predict both prices and rents for the same flats in all of 3 periods and to show that consistent with previous studies, price-rent ratios in Moscow are higher for bigger and more central units. I also reveal other determinants of price-to-rent ratio, such as district characteristics, repair quality and distance to nearest metro station. Next, I test the power of price-to-rent ratios to predict changes both in sale and rent prices in response to a city-wide negative demand shock caused by coronavirus pandemic and depreciation of Russian ruble. First, I show that when house prices are high relative to rents (that is, when the price-to-rent ratio is high), decrease in both sale and rent price tend to be lower than usual. Second, I find that the variation in housing price depreciation for apartments with higher initial price-to-rent ratios is greater in terms of sale prices and lower in terms of rent prices. Third, I show that increase in price-to-rent ratios tends to be larger for apartments with higher initial price-to-rent ratios, meaning that sale prices for those apartments do not decrease enough to keep up with decrease in rents, compared to apartments with lower initial price-to-rent ratios, alluding a presence of possible housing bubble at the market.