"Rising Home Prices in Major Countries... A Buffer Against COVID-19 Induced Economic Slowdown"

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] On the 22nd, KB Securities released an analysis stating that the globally prominent rise in housing prices will have the effect of mitigating the economic contraction caused by the COVID-19 pandemic.

Kim Hyojin, a researcher at KB Securities, explained, "The upward trend in housing prices in major countries has expanded recently," adding, "The widening negative real interest rates have eased financial conditions, which is leading to an increase in prices of risk assets such as housing."

He said, "Although a sharp rise in housing prices relative to economic strength is not entirely welcome, given the inevitable economic contraction in the first half of the year due to COVID-19, the rise in housing prices and robust construction activity in various countries will serve as a buffer against the overall economic downturn. In major countries like the United States and Germany, the rise in housing prices is translating into favorable construction indicators, and construction employment is steadily increasing compared to the stagnant manufacturing employment," he stated.

Researcher Kim emphasized that the rise in housing prices could play a buffering role to partially offset the contraction expected in trade and manufacturing caused by COVID-19.

He analyzed, "Although the economic impact of COVID-19 will inevitably lead to contraction in trade, manufacturing production, and overseas consumption by tourists, housing prices and construction activity are relatively influenced by domestic factors. The favorable construction investment and construction employment, which are less related to trade, will slightly offset the economic contraction."