Demographic Factors and the Demand for Housing in the Helsinki Metropolitan Area

Mika Kuismanen, Seppo Laakso and Heikki Loikkanen

No 191, Discussion Papers from VATT Institute for Economic Research

Abstract: We examine the role of demographics on the housing market in the Helsinki Metropolitan Area (HMA) using the Mankiw and Weil (1989) approach. First, we estimate housing demand for each age group in HMA using cross section data and find that it increases from childhood to the age 70-74 years. This profile differs from those estimated for the US and Sweden. Next, we construct time series data of housing consumption and demographic housing demand for HMA in 1962-97. In the latter, we use population statistics and the results of our cross section analysis. We also estimate a housing price model, but our main interest is in housing demand which is explained by demographic demand, real income, user costs of housing and unemployment rate in HMA. One percent increase in demographic demand leads to almost one percent growth in total housing demand. Our income elasticity is quite low, about 0.1. Finally, our cross section and time series results, together with population prognoses, are used in forecasting housing demand in HMA for the years 1997-2015.

Keywords: Housing demand, demography, Helsinki, Economic growth, Taloudellinen kasvu, Regional development, Aluekehitys, Policy analysis and modelling, Päätöksenteon tuki ja mallintaminen, C300 - Econometric Methods: Multiple/Simultaneous Equation Models; Multiple Variables: General, J100 - Demographic Economics: General, O180 - Economic Development: Regional, Urban, and Rural Analyses, R210 - Urban, Rural, and Regional Economics: Housing Demand, R310 - Housing Supply and Markets, (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (1)

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