THE INFLUENCE OF POPULATION AGEING ON HOUSE PRICES IN CHINA

Abstract

This thesis tries to clarify the issue of the effect of population ageing on the housing market. Existing studies find both positive and negative effects, which may be because they do not distinguish between the effects of population growth and population ageing. I show that both signs are possible using a three-period overlapping generations model. The impact of population ageing is divided into two opposite effects: the size effect and the age composition effect. The static comparative analysis shows that under the reasonable assumption, the size effect is positive, and the age composition effect is negative. Based on the data from 35 cities during the period of rapid population ageing in China, panel data regressions are used to examine the two opposite effects. The estimates are consistent with the predictions of the theoretical analysis. Regarding the size effect, a 1% increase in population size can push up house prices by 0.41%. Regarding the age composition effect, a 1% increase in the old-age dependence ratio can lead to a 1% drop in house prices.