Housing market and demography, evidence from French panel data

Abstract

Worldwide variations in the population structure are taking place over the next century, and this is expected to have impacts on the whole economic systems, and particularly on the housing market (i.e. price of homes, ownership structure, and supply and demand of residential properties). In this paper, we empirically investigate how the French real estate is affected by both economic and demographic factors. Starting from the theoretical benchmark model of Takˆts (2012), we fist investigate the relationship between collective and individual housing prices dynamics and GDP, total population and old age dependency ratio. Results from fixed effect regressions on 94 French departments on the period 2000-2013 show that real estate prices are significantly and positively affected by the total population number and the total GDP, while they are significantly and negatively affected by the old age dependency ratio (ratio of population aged 60+ to the working population). This study, to our knowledge, is conducted for the first time across departments in France. Furthermore, obtained results and the particular case of France have motivated further research by enriching the baseline model with various financial, real estate, economic and demographic explanatory variables and analyzing our panel in a more segmented way. In all cases, economic impact on real estate market is significant and around the unit_ i.e. 1% increase in GDP leads a 1% increase in housing prices_ while demographic factors seem to have a greater impact on housing market prices.