Demography and housing demand–What can we learn from residential construction data? ∗ Thomas Lindh † and Bo Malmberg ‡ May 15, 2002 Abstract There are obvious reasons why residential construction directly and in- directly should depend on the population’s age structure. We estimate this relation on Swedish time series data and OECD panel data. As expected large groups of young adults are associated with higher rates of residential construction. But there is also a significant negative effect from the age groups above 75. Theoretically this may be explained by a hump-shaped life cycle demand pattern over age. Strongly increasing mortality rates at that age form an important part of the explanation. The age effects on res- idential investment are considerably more robust than the corresponding house price results. In view of rapidly aging populations in the industri- alized world the future looks bleak for the construction industry of these countries. JEL Codes: R21, R23, R31 Key words: Residential construction, age distribution, housing demand ∗ We greatly appreciate helpful comments from discussants and participants at the Research Seminar of the Institute for Housing Research 14-16 April 1999 in Gävle, at the Workshop for Age Effects on the Macroeconomy 2-4 June 1999 in Stockholm, at the European Network for Housing Research Conference 2000 in Gävle 26-30 June 2000, the Macroeconomic Workshop at Uppsala University and the Population Association of America 2002 Annual Meeting in Atlanta 9-11 May. We are grateful to Lars Fälting and Lennart Berg for help with the Swedish data. † Department of Economics, Uppsala University, Box 513, SE-751 20 Uppsala, Sweden, tel +46-18-4711103, fax +46-18-4711478, email thomas.lindh@nek.uu.se, URL http://www.nek.uu.se/faculty/lindh. Also affiliated to the Institute for Futures Studies, Box 591, SE-101 31 Stockholm, Sweden, tel +46-8-4021216. ‡ Department of Social and Economic Geography, Box 513, SE-751 20 Uppsala, Sweden, tel +46-18-471 2199, fax +46-18-471 7418, email bo.malmberg@kultgeog.uu.se. Also affiliated to the Institute for Futures Studies, Box 591, SE-101 31 Stockholm, Sweden, tel +46-8-4021200.