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

52 Pages Posted: 7 May 2019 Last revised: 15 Dec 2020

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: December 14, 2020

Abstract

How do changes in population structure such as population aging affect housing markets? This paper exploits historical demographic changes to identify the effect of urban demographic change on housing costs, building on half a millennium of data on house prices, rents, and demographics. 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. Linking the age of individuals to their housing decisions, real estate transactions and investment portfolios, we show these changes are primarily driven by the age-dependent demand for housing as investment asset. Correspondingly, we find large impacts of demographic structure on rent-price ratios, but smaller impacts on rent prices.

Keywords: house prices, fertility, portfolio choice, demographic structure

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 (December 14, 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 )

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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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