Baby Booms and Asset Booms: Demographic Change and the Housing Market

69 Pages Posted: 7 May 2019 Last revised: 12 Oct 2022

See all articles by Marc Francke

Marc Francke

University of Amsterdam - Faculty of Economics and Business (FEB); Ortec Finance

Matthijs Korevaar

Erasmus School of Economics

Date Written: Oct 10, 2022

Abstract

How do demographic changes affect asset prices? Based on centuries of data, this paper shows that demographic changes are a key and predictable determinant of house prices. A one percentage point increase in the current birth rate increases house prices about 25-30 years later by 4 to 5%. Using individual data on housing decisions, transactions and portfolios we argue this is driven by strongly age-dependent demand for home-ownership and the limited response of investors to such shocks. Correspondingly, we find large impacts of past birth rates on rent-price ratios, but negligible impacts on rent prices, bond yields, and dividend yields.

Keywords: house prices, portfolio choice, demographic structure, return predictability

JEL Classification: G11, G12, R31, N33, J10

Suggested Citation

Francke, Marc and Korevaar, Matthijs, Baby Booms and Asset Booms: Demographic Change and the Housing Market (Oct 10, 2022). Available at SSRN: https://ssrn.com/abstract=3368036 or http://dx.doi.org/10.2139/ssrn.3368036

Marc Francke

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands

HOME PAGE: http://www.uva.nl/en/contact/staff/item/m.k.francke.html?f=francke

Ortec Finance ( email )

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Amsterdam, 1043 CP
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HOME PAGE: http://www.ortec-finance.com

Matthijs Korevaar (Contact Author)

Erasmus School of Economics ( email )

Netherlands

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