Korea’s population is expected to be aging at an unprecedented rate, according to various demographic data. Furthermore, Korea is in the lowest rungs in birth rate and residual life expectancy—determinants to population aging—implying the trend will persist. During the past ten years, many have studied the impact of population aging on Korea’s economic system from various angles. This study adopts a few new perspectives on the impact and discusses policy implications. First, it estimates the impact of population aging on aggregate housing demand by conducting an empirical analysis, using the Age-Period-Cohort (APC) model embedded with the cohorts of birth years. Also, in order to examine the impact from a general equilibrium viewpoint, the study uses the Overlapping Generation Model (OGM) and analyzes the impact of population aging on the overall macroeconomic situation via the housing market. Using micro-data on households in Korea, Japan and China, the study also compares the population aging trend and related consumption patterns.
The findings imply that in the short-term, Korea’s housing market is not highly likely to be impacted by population aging, a low birth rate and retiring baby boomers. However, starting in 2030, when the nation’s population starts to shrink, the impact will most likely come true. Thus, this study stresses the urgency of developing comprehensive policy measures that could properly respond to population aging in the long-term. Policy recommendations discussed in this study include enhancing housing welfare and income security particularly for poor elderly people, liquidation of homes and other real estate and housing supply that could sustain long-term stability in the housing market.