Fertility Rate, Demographic Structure And Real Estate Market

Since the overall market-oriented housing system established in 1998, housing demand and housing price in China have kept increasing year by year. Meanwhile, demographic factors are experiencing huge transitions. Specifically, the impact of the generation born in 1980s who are getting into marriage, the demographic dividend of age structure, the rapid process of urbanization and massive inter-regional migrants can all boom China’s housing market. On the basis of the situation in China, the paper conducts a series of theoretical and empirical studies to figure out how demographic factors, including fertility rate, age structure and population migration, impact on housing demand and housing price.The main findings are as follows:First, the study provides solid evidence that the baby boom in 1960s and their relatively low fertility rates play an important role in the Chinese housing markets. Against the background of China, parents would like to provide some financial supports for their children on purchasing houses and realize the inter-generation wealth transfer. The transferred wealth will finally flow into the housing market and drive up housing price. From this point of view, this study has established an overlapping generation model in a new perspective involving inter-generation wealth transfer and the fertility rates of different generations. The theoretical model and empirical study both indicate that the inter-generation wealth transfer has a positive effect on housing price, and is affected by fertility rate and housing consumption of the previous generation.Second, the current demographic structure contributes to the increase in housing price, which is a kind of demographic dividend in housing market. The studies based on micro and macro data both reveal that a decrease in the ratio of children result in an increase in housing demand and housing price. Meanwhile, the increase of the elderly will not have a negative effect on housing market, on the contrary, the diverse demand of the old will incur higher housing price.Third, the process of urbanization and the population migration among cities, have a positive effect on both housing demand and housing price. Population migration on city level plays an important role in shaping demographic structure of one city, and is the key to continue the prosperous development of housing market.Our paper expands the researches on the relationship of demographic factors and housing market on theoretical level. The findings are also helpful to understand the dynamics of rapidly increasing housing price in China. The findings may provide useful implications to facilitate government decisions. Since changes of demographic factors to a certain extent are predictable, the government can take some precautions to lead a sound development of housing market.