Interregional Migration and Real Estate Markets Evidence from German Case

Demography is a driving force in the demand for real estate. However, demography is only partly driven by natural population growth, but also by migration, and there is the potential, that the interregional shift of population causes similar effects as changes in natural growth – but at a higher speed. With this prospect, we want to observe the impact of demography on a regional level. In order to do this, we choose a case study of relatively high interregional migration: German reunification. Using a modified model by Mankiw and Weil (1989) we derive the following implications. First, that rents should be positively related to monetary policy rates. Second, rents should be positively related to the business cycle. Third, rents are positively related to the development of the local population. We test empirically with data set from IVD (Immobilien Verband Deutschland) from 1989 to 2009. We found that rents are positively related to monetary policy and business cycle. And also population change has impact on rent in West Germany cities and states after German reunification.