(Job Market Paper)
Aging populations, driven by low fertility rates and increasing longevity, are a defining trend in
most advanced economies. This demographic shift has far-reaching implications for asset prices
and rates of return. This research investigates the relationship between demographic change and
house prices. Using a quantitative life-cycle model calibrated to German microdata, I document
the following: In line with past trends (1) demographic factors have contributed significantly
to the long-term rise in housing prices of which much can be attributed to indirect general
equilibrium effects of falling real rates. (2) Based on projected demographic trends, the model
suggests that over the remainder of the 21st century declining populations and rising old-age
dependency ratios place downward pressure on real house prices while (3) the composition of
wealth shifts from capital to housing wealth mitigating the drop in real rates.