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Demographic Factors and the Demand for Housing in the Helsinki Metropolitan Area

  • Mika Kuismanen
  • Seppo Laakso
  • Heikki A. Loikkanen

We examine the role of demographics on the housing market in the Helsinki Metropolitan Area (HMA) using the Mankiw and Weil (1989) approach. First, we estimate housing demand for each age group in HMA using cross section data and find that it increases from childhood to the age 70-74 years. This profile differs from those estimated for the US and Sweden. Next, we construct time series data of housing consumption and demographic housing demand for HMA in 1962-97. In the latter, we use population statistics and the results of our cross section analysis. We also estimate a housing price model, but our main interest is in housing demand which is explained by demographic demand, real income, user costs of housing and unemployment rate in HMA. One percent increase in demographic demand leads to almost one percent growth in total housing demand. Our income elasticity is quite low, about 0.1. Finally, our cross section and time series results, together with population prognoses, are used in forecasting housing demand in HMA for the years 1997-2015.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 191.

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Date of creation: 01 Jan 1999
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Handle: RePEc:fer:dpaper:191
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  1. Engelhardt, Gary V. & Poterba, James M., 1991. "House prices and demographic change: Canadian evidence," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 539-546, December.
  2. Pitkin, John R. & Myers, Dowell, 1994. "The Specification of Demographic Effects on Housing Demand: Avoiding the Age-Cohort Fallacy," Journal of Housing Economics, Elsevier, vol. 3(3), pages 240-250, September.
  3. Barot, Bharat & Takala, Kari, 1998. "House Prices and Inflation: A Cointegration Analysis for Finland and Sweden," Research Discussion Papers 12/1998, Bank of Finland.
  4. Hamilton, Bruce W., 1991. "The baby boom, the baby bust, and the housing market A second look," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 547-552, December.
  5. Hendershott, Patric H., 1991. "Are real house prices likely to decline by 47 percent?," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 553-563, December.
  6. N. Gregory Mankiw & David N. Weil, 1988. "The Baby Boom, The Baby Bust, and the Housing Market," NBER Working Papers 2794, National Bureau of Economic Research, Inc.
  7. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-37, March.
  8. Seppo Honkapohja & Erkki Koskela & Jouko Paunio, 1996. "The depression of the 1990s in Finland : an analytic view," Finnish Economic Papers, Finnish Economic Association, vol. 9(1), pages 37-54, Spring.
  9. Heiborn, M., 1994. "Demographic Factors and the Demand for Housing," Papers 1994-30, Uppsala - Working Paper Series.
  10. Alperovich, Gershon, 1995. "The Baby Boom, the Baby Bust and the Housing Market: A Further Look at the Debate," The Annals of Regional Science, Springer, vol. 29(1), pages 111-16, February.
  11. Swan, Craig, 1995. "Demography and the demand for housing A reinterpretation of the Mankiw-Weil demand variable," Regional Science and Urban Economics, Elsevier, vol. 25(1), pages 41-58, February.
  12. Koskela, Erkki & Loikkanen, Heikki A. & Viren, Matti, 1992. "House prices, household saving and financial market liberalization in Finland," European Economic Review, Elsevier, vol. 36(2-3), pages 549-558, April.
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