Changing Demographic Trends and Housing Market in Pakistan

Abstract

This paper analyzes the impact of changing demographic
trends on housing market in Pakistan. An analytic device, a
phase diagram, has been used to show the relationship between
demographic change and demand for housing in Pakistan. The
characteristics of this paper are as follows. First, a model
comprising four equations is developed to investigate the
relationship between different variables such as housing stock,
demand for housing, real rental price, rate of depreciation, net
investment in housing, gross investment in housing, real price
of housing unit and growth in population. Second, set of four
equations is reduced to two differential equations which are
used to solve for house prices (P) and number of houses per
adult in a country (h). These two equations are also used to
draw phase diagrams and to draw our conclusions. It is
concluded that house prices are directly related to growth rate
of population and inversely related to the number of houses per
adult. In Pakistan, a rise in the growth rate of the adult (housebuying
years segment) population will increase the demand for
housing for the next four decades. Moreover, a fall in the total
population growth rate could not cause downward trend in
house prices because of changing age structure. We have to
consider the composite impact of all related factors on house
prices which in turn impact the supply and demand for housing
in country.