Population aging, unemployment and house prices in South Africa

摘要

This paper examines the joint dynamics between house prices, population aging and unemployment in South Africa. It uses provincial-level data set to compare the demographic effects of house prices across different housing segments over the period from 1995 to 2015. When heterogeneity, endogeneity and spatial effects are controlled for, the analysis finds that on average in the past 22 years, population aging has contributed to the decline of the South African house prices by 6.28 and 7.52 basis point in the large and medium housing segments, respectively, while the small segment has remained unaffected. Likewise, unemployment appears to have played a significant role in slowing down the growth rate of house prices across segments but to a lesser extent. While the response of real house prices to demographic shift is consistent with the life cycle hypothesis, the insensitivity of small house prices to aging might reveal the mitigating effect of the retirees' relocation from larger segment houses to smaller ones. The relocation effect might induce higher demand of small segment houses which drives up their prices and offsets the detrimental effect of aging. These findings suggest that increasing the incentive to prolong the retirement age or engage elderly population in other income-generating activities to meet their increasing financial needs given the meagre social security system is likely to sustain the growth prospective of housing value in South Africa.