Demographics, human capital, and the demand for housing

• This paper links housing demand and demographics at the household level.
• Existing methodology is refined by distinguishing between life cycle and cohort attributes.
• Housing demand is mainly driven by human capital and does not decline with age.
• Study based on English data; results hold for industrialized countries in general.

This paper investigates how the demand for residential real estate depends on age and other demographic characteristics at the household level. Based on a detailed cross-sectional survey of English households, it finds that housing demand is significantly determined by a household’s human capital, and that housing demand generally increases with age. After retirement it declines, but only to a small extent. High education levels, good health, and high income will increase a household’s demand for housing even when households age. These results are relevant for countries that experience population shrinkage, but where total housing demand could still grow in the future despite stagnating household numbers and aging populations. The paper further shows that changes in demographics lead to very heterogeneous demand responses for different housing attributes, providing information regarding the future qualitative demand for housing.