Baby Booms and Asset Booms: Demographic Change and the Housing Market
38 Pages Posted: 7 May 2019 Last revised: 3 Apr 2020
Date Written: April 2, 2020
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
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