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Do demographic changes affect house prices?

Published online by Cambridge University Press:  07 November 2019

Kristine Gevorgyan
Kristine Gevorgyan*
Affiliation:
University of Economics, Prague, Czech Republic
*
*Corresponding author. E-mail: xgevk00@vse.cz
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Abstract

The paper tests the idea that major demographic shifts can affect housing prices. We first build an overlapping generation model and analytically solve for the equilibrium price of the asset. The model predicts that economies with a higher fraction of old people in the overall population have lower house prices. We empirically test this hypothesis using data on house prices and demographic variables from the Organization for Economic Co-operation and Development (OECD). We find that if population growth increases by one percentage point, house price growth increases by 1.4 percentage points.

Keywords

Aging populationdemographicshouse prices

JEL classification

E31: Price Level • Inflation • Deflation E21: Consumption • Saving • Wealth J11: Demographic Trends, Macroeconomic Effects, and Forecasts
Type
Research Papers
Information
Journal of Demographic Economics , Volume 85 , Issue 4 , December 2019 , pp. 305 - 320
Copyright
Copyright © Université catholique de Louvain 2019 

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