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.