The Impact of Population Ageing on House Prices: A Micro-Simulation Approach

27 Pages Posted: 30 Jun 2012

See all articles by Yu Chen

Yu Chen

University of Glasgow

Kenneth D. Gibb

University of Glasgow - Department of Urban Studies

Chris Leishman

Heriot-Watt University

Robert Wright

University of Strathclyde in Glasgow; Institute for the Study of Labor (IZA)

Abstract

This paper attempts to estimate the impact of population ageing on house prices. There is considerable debate about whether population ageing puts downwards or upwards pressure on house prices. The empirical approach differs from earlier studies of this relationship, which are mainly regression analyses of macro time-series data. A micro-simulation methodology is adopted that combines a macro-level house price model with a micro-level household formation model. The case study is Scotland, a country that is expected to age rapidly in the future. The parameters of the household formation model are estimated with panel data from the British Household Panel Survey covering the period 1999-2008. The estimates are then used to carry out a set of simulations. The simulations are based on a set of population projections that represent a considerable range in the rate of population ageing. The main finding from the simulations is that population ageing – or more generally changes in age structure – is not likely a main determinant of house prices, at least in Scotland.

Keywords: population ageing, house prices, Scotland

JEL Classification: J1, R2

Suggested Citation

Chen, Yu and Gibb, Kenneth D. and Leishman, Chris and Wright, Robert, The Impact of Population Ageing on House Prices: A Micro-Simulation Approach. IZA Discussion Paper No. 6668, Available at SSRN: https://ssrn.com/abstract=2096798 or http://dx.doi.org/10.2139/ssrn.2096798

Yu Chen (Contact Author)

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Kenneth D. Gibb

University of Glasgow - Department of Urban Studies ( email )

65-71 Southpark Avenue
Glasgow G12 8LE
United Kingdom

Chris Leishman

Heriot-Watt University ( email )

Riccarton
Edinburgh EH14 4AS, Scotland EH14 1AS
United Kingdom

Robert Wright

University of Strathclyde in Glasgow ( email )

16 Richmond Street
Glasgow 1XQ, Scotland G1 1XQ
United Kingdom

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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