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Aging and Real Estate Prices: Evidence from Japanese and US Regional Data

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Author Info

  • Yumi Saita

    (Hitotsubashi University)

  • Chihiro Shimizu

    (Reitaku University and University of British Columbia)

  • Tsutomu Watanabe

    (The University of Tokyo)

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    Abstract

    In this paper, we empirically investigate how real estate prices are affected by aging. We run regional panel regressions for Japan and the United States. Our regression results show that, both in Japan and the U.S., real estate prices in a region are inversely correlated with the old age dependency ratio, i.e. the ratio of population aged 65+ to population aged 20-64, in that region, and positively correlated with the total number of population in that region. The demographic factor had a greater impact on real estate prices in Japan than in the U.S. Based on the regression result for Japan and the population forecast made by a government agency, we estimate the demographic impact on Japanese real estate prices over the next 30 years. We find that it will be -2.4 percent per year in 2012-2040 while it was -3.7 percent per year in 1976-2010, suggesting that aging will continue to have downward pressure on land prices over the next 30 years, although the demographic impact will be slightly smaller than it was in 1976-2010 as the old age dependency ratio will not increase as much as it did before.

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    File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/F334.pdf
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    Bibliographic Info

    Paper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-334.

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    Length: 27 pages
    Date of creation: Dec 2013
    Date of revision:
    Handle: RePEc:cfi:fseres:cf334

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    1. Takáts, Előd, 2012. "Aging and house prices," Journal of Housing Economics, Elsevier, vol. 21(2), pages 131-141.
    2. Ohtake, Fumio & Shintani, Mototsugu, 1996. "The effect of demographics on the Japanese housing market," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 189-201, April.
    3. Robert F. Martin, 2005. "The baby boom: predictability in house prices and interest rates," International Finance Discussion Papers 847, Board of Governors of the Federal Reserve System (U.S.).
    4. Patric H. Hendershott, 1991. "Are Real House Prices Likely to Decline by 47 Percent?," NBER Working Papers 3880, National Bureau of Economic Research, Inc.
    5. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    6. Kiyohiko Nishimura & Elod Takáts, 2012. "Ageing, property prices and money demand," BIS Working Papers 385, Bank for International Settlements.
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