Demographic impacts on housing demand in Germany

Philipp Deschermeier, Cologne Institute for Economic Research
Ralph Henger, Cologne Institute for Economic Research

Demographic change is dramatically transforming the German society: the ratio of young to old and of the gainfully employed to pensioners is shifting in favor of older persons. In the coming decades this development causes substantial macroeconomic structural transformation affecting all of the important markets in Germany. For example the labor market will lack young workers or the capital market will see changing saving bahaviors and investment rates. With respect to the real estate market the change in the age structure and the regional distribution of the population will affect the demand for personal living space. Besides the macroeconomic dimension, the demand for personal living space is determined by social factors (e.g. more “living apart together” relationships increase the demand for smaller flats in the metropolitan areas), demographic factors (old people demand other housing as young) and individual preferences (buying vs. renting properties). The research proposal aims at providing forecasts of the age specific demand of personal living for Germany until 2030. The analysis will use data of the German Socio-Economic Panel, a longitudinal panel dataset of the population in Germany. The analysis will feature a functional data model with time series coefficients, which are used to model the age-specific demand for living space, differentiated to types of housing and regions. This model will be forecasted up to the year 2030. The results provide an insight on the challenges of the demographic transition in Germany with respect to the demand for housing and real estate markets in general.