The Price of Being Wrong : How Population Forecast Errors and Aging Affect Japan’s Housing Market

Japan’s population is rapidly shrinking and aging, which pose growing challenges for local housing markets. Demographic change is largely anticipated by planners and developers. This study therefore examines how unexpected demographic shocks, measured as population forecast errors, affect housing prices across Japanese municipalities. Using panel data for 2010, 2015, and 2020, we estimate fixed-effects regressions with land transaction prices as the dependent variable, controlling for aging and income. The results show clear heterogeneity: positive forecast errors are associated with higher housing prices in metropolitan municipalities, while effects in nonmetropolitan areas are weak and imprecise. In contrast, population aging exerts a consistently negative effect on prices outside urban centers. These findings suggest that demographic uncertainty matters primarily in high-density housing markets, while structural aging is a more important variable for price adjustments elsewhere.