Demographic changes and housing demands by scenarios with ASFRs

Abstract

PurposeThis paper's objective is to provide improvement plans that take into account problems in the housing sector, as well as low fertility and demographic problems caused by aging, by suggesting long‐term policy directions considering all future possible changes in fertility and housing policies.Design/methodology/approachThis research analyzes age specific fertility rates by socioeconomic index, composition of three scenarios about the total fertility rate, the forecast of the future population by the cohort component method, and the forecast of housing demand according to the Mankiw‐Weil (M‐W) model.FindingsIf the fertility rate increases through improvements in socioeconomic conditions, then we see that housing demand also increases. If the fertility rate level is higher than that of scenario 3, then a housing demand decrease comes later. However, even if the low fertility rate issue is addressed, the problem with the housing market due to the aging is expected to continue for the time being.Practical implicationsIf the population decrease cohort is accumulated due to the continuously low fertility, then it will cause an increase in the reduction effect of housing demand. Considering housing spaces, the elderly require a relatively large amount of available space in Korea where the aged population is rapidly increasing. This increase in seniors could counterbalance the reduced demand for housing.Originality/valueThis is a long‐term‐oriented paper about housing demand and the changing trends in Korea, which is undergoing demographic changes due to low fertility and ongoing aging. We need to monitor fertility rates and the structure of population changes to achieve a stable housing market, and we should also recognize that these structural changes by age will have diverse ripple effects on housing demand.