Demography and Housing Demand: What Can We Learn from Residential Construction Data?

Thomas Lindh, Institute for Futures Studies
Bo Malmberg, Uppsala University

There are obvious reasons why residential construction directly and indirectly should depend on the population's age structure. We estimate this relation on Swedish time series data and OECD panel data. As expected large groups of young adults are associated with higher rates of residential construction. But there is also a significant negative effect from the age groups above 75. Theoretically this may be explained by a hump-shaped life cycle demand pattern over age. Strongly increasing mortality rates at that age form an important part of the explanation. The age effects on residential investment are considerably more robust than the corresponding house price results. In view of rapidly aging populations in the industrialized world the future looks bleak for the construction industry of these countries.