Population aging and house prices: Who are we calling old?

This paper empirically studies the relationship between population aging and real house prices in 21 OECD countries. I redefine the old-age dependency ratio using the effective retirement age and remaining years to life expectancy to explore the heterogeneous aging effect on real house prices. I find that an increase in the dependency ratio based on remaining years to life expectancy explains a decrease in real house prices, but the dependency ratio of the effectively retired population does not. By splitting the young–old and the old–old groups, I confirm that the negative association with real house prices is driven by an increase in the dependency ratio of the old–old group. The findings overall suggest that population aging is unlikely to mean ever decreasing real house prices because the negative effect is driven by the very old population with a short expected remaining life.