When Birth or Death Hits Home: Demographic Change and the Housing Market

51 Pages Posted: 7 May 2019 Last revised: 1 Nov 2019

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: October 16, 2019

Abstract

How do population aging and urbanization 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 investment asset: we find large impacts of demographic structure on rental yields, but smaller and less significant impacts on bond yields and rent prices. However, we document large impacts of demographic changes on rent prices in the short-term. Exploiting outbreaks of the plague as an exogenous shock to population, we identify a short-term annual elasticity of population on rent prices of about 1.25.

Keywords: house prices, rents, population, fertility

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

Suggested Citation

Francke, Marc and Korevaar, Matthijs, When Birth or Death Hits Home: Demographic Change and the Housing Market (October 16, 2019). 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
Netherlands
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HOME PAGE: http://www.ortec-finance.com

Matthijs Korevaar (Contact Author)

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

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