House Price Predictability and Demographic Structure: Evidence from a Long-horizon International Data

We examine the predictability of real house price movements along with demographic shifts, using a long time series international panel data set that covers 17 advanced countries over the period of 1950-2015. Since demographic structures change slowly and housing markets adjust slowly to economic fundamentals, we conduct our analysis over forecast horizons of 1, 2, 5, and 10 years. We find that (1) two most relevant demographic predictors for the future house price movements both over short- and long-horizon are the proportion of ages 70 and above in population of 20 years old and above and the proportion of ages 25-44; and (2) if samples are spanning over relatively short period in time, one can be misled about the house price predictability of demographic structures. These new results help to reconcile mixed evidence from the existing studies.