DP5143 The Impact of Changing Demographics and Pensions on The Demand for Housing and Financial Assets

Author(s): Ales Cerny , David K Miles , Lubomir Schmidt

Publication Date: July 2005

Keyword(s): pension reform , portfolio allocation , housing , OLG model

JEL(s): C61 , G11 , H31 , H55

Programme Areas: Financial Economics , Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP5143.asp

Using a calibrated OLG model with several sources of uncertainty we find that the impact of ageing and of reform of social security upon the demand for housing and the level of owner occupation is substantial. The overall structure of household asset holdings – in particular the split between real and financial assets – is sensitive to demographics and to the generosity of state run, pay-as-you-go pensions. The interaction between social security reform and housing market conditions is significant and suggests that any changes in pension rules will have substantial knock on effects on the housing market.