Population aging and house prices: Who are we calling old?

Abstract

This paper empirically studies the relationship between population aging and real house prices in 21 OECD countries. I redefine the old-age dependency ratio using the effective retirement age and remaining years to life expectancy to explore the heterogeneous aging effect on real house prices. I find that an increase in the dependency ratio based on remaining years to life expectancy explains a decrease in real house prices, but the dependency ratio of the effectively retired population does not. By splitting the young-old and the old-old groups, I confirm that the negative association with real house prices is driven by an increase in the dependency ratio of the old-old group. The findings overall suggest that population aging is unlikely to mean ever decreasing real house prices because the negative effect is driven by the very old population with a short expected remaining life.