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Too Many Houses, Too Few People : Demographic Optimism, Housing Oversupply, and Falling House Prices across Advanced Economies

Author

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  • DENG, Yongheng
  • INOUE, Tomoo
  • NISHIMURA, Kiyohiko
  • SHIMIZU, Chihiro

Abstract

In population bonus periods, optimism about future housing demand fuels rapid construction and self-reinforcing price appreciation. In population onus periods, pessimism-amplified by the systematic failure of governments to revise demographic projections downward in a timely manner-drives structural oversupply, rising vacancy rates, and prolonged price stagnation. We formalise this mechanism through a present-value model in which the demographic regime asymmetrically shifts expected rent growth and the discount rate, and test it using annual panel data for 16 advanced economies over 1975- 2019. Pooled mean-group estimation shows that a rising old-age share significantly depresses long-run real house prices; the unanticipated ageing component (-8.826) substantially exceeds the government-projected component (-5.005). A rising youth share raises prices. Demographic structure further conditions monetary policy transmission: interest-rate cuts stimulate housing markets far more strongly in young than in ageing economies.

Suggested Citation

  • DENG, Yongheng & INOUE, Tomoo & NISHIMURA, Kiyohiko & SHIMIZU, Chihiro, 2026. "Too Many Houses, Too Few People : Demographic Optimism, Housing Oversupply, and Falling House Prices across Advanced Economies," RCESR Discussion Paper Series DP26-2, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:rcesrs:dp26-2
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    References listed on IDEAS

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    1. DENG, Yongheng & INOUE, Tomoo & NISHIMURA, Kiyohiko & SHIMIZU, Chihiro, 2026. "Aging and the Price Level : Irreversible Capital, Demographic Transitions, and the Shifting Phillips Curve," RCESR Discussion Paper Series DP26-3, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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