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

38 Pages Posted: 7 May 2019 Last revised: 3 Apr 2020

See all articles by Marc Francke

Marc Francke

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

Matthijs Korevaar

Maastricht University - Department of Finance

Date Written: April 2, 2020

Abstract

How do changes in population structure such as population aging affect housing markets? This paper exploits historical demographic shocks to identify the causal effect of urban demographic change on housing costs, building on half a millennium of data on house prices, rents and demographics from Paris and Amsterdam. We show that a one percentage point increase in the current five-year birth rate increases house prices about 25 years later by 5%, but reduces prices 60-65 years later by the same amount. These changes are primarily driven by the age-dependent demand for housing as an investment asset. We find large impacts of demographic structure on rental yields, but smaller and less significant impacts on bond yields and rent prices.

Keywords: house prices, rents, fertility, demographic structure

JEL Classification: R21, R30, N33, N90, J10

Suggested Citation

Francke, Marc and Korevaar, Matthijs, Baby Booms and Asset Booms: Demographic Change and the Housing Market (April 2, 2020). 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 )

Orly Centre
Barajasweg 10
Amsterdam, 1043 CP
Netherlands
+ 31 20 7009 700 (Phone)
+ 31 20 7009 701 (Fax)

HOME PAGE: http://www.ortec-finance.com

Matthijs Korevaar (Contact Author)

Maastricht University - Department of Finance ( email )

Tongersestraat 53
Maastricht, Limburg 6211 LM
Netherlands

HOME PAGE: http://sites.google.com/view/matthijskorevaar/home

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