“Population Aging and Housing Prices”

 Yi Jin, Southwestern University of Finance and Economics

 Siew Ling Yew, Monash University

 Zhixiong Zeng, Zhongnan University of Economics and Law

 This paper examines the relationship between demographic structure and housing market in an overlapping-generations model of accidental bequest with endogenous fertility and savings. In the model, agents face uncertainty in survival from young to old. Young adults earn wage income, receive accidental bequest from their parents, and decide upon the number of children, consumption, savings, housing for own residence as well as housing for lease. When agents become old, they liquidate their housing equity to fund their old-age consumption and rental of housing. We analyse how parameters that characterize demographic structure, the taste for housing and time preferences affect housing market, fertility, the dependency ratio, and savings in a general equilibrium setting. A numerical exercise based on Netherlands data reveals the potential of our model in explaining the relationship between housing prices and the dependency ratio observed in the Netherlands, and more broadly in countries with low retirement saving since 1970s.