Demographic change and real house prices: a general equilibrium perspective

Alessandro Piergallini

Journal of Economics, 2020, vol. 130, issue 1, No 4, 85-102

Abstract: Abstract This paper analyzes the effects of demographic changes on the long-run pattern of real house prices in an overlapping generations general equilibrium model with housing-wealth effects. It is demonstrated that declines in the birth rate and in population growth, associated with increases in life expectancy, generate disinflation and a fall in the real interest rate, triggering a rise in real house prices over the long run. The positive relationship between contemporary demographic trends and real house price trends observed in the United States and in the OECD countries is thus not puzzling, but is perfectly consistent with dynamic macroeconomic theory. In this context, ceteris paribus, falling prices in the housing market are possible only when self-fulfilling boom–bust dynamics, unrelated to demographic fundamentals, occur.

Keywords: Demographic change; Real house prices; Macroeconomic dynamics (search for similar items in EconPapers)
JEL-codes: E10 E31 G12 J11 R21 R30 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Demographic Change and Real House Prices: A General Equilibrium Perspective (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:130:y:2020:i:1:d:10.1007_s00712-019-00670-y

DOI: 10.1007/s00712-019-00670-y

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