The Japanese real estate conundrum: a panel data analysis of aging, population stagnation, and long-term house price trends

Purpose This study examines whether Japan’s prolonged housing downturn reflects unique domestic factors or broader structural forces observable across advanced economies. By situating Japan within a comparative OECD framework, the paper evaluates the long-run roles of income growth, population dynamics and demographic aging in shaping real house price movements. The purpose of this study is to determine to what extent Japan’s post-1991 decline can be interpreted as an extreme case of general macroeconomic and demographic mechanisms rather than an isolated national anomaly. Design/methodology/approach The study constructs a balanced panel of 19 OECD economies from 1990 to 2019 and estimates panel regressions with country and year fixed effects to identify long-run drivers of real house price growth. The preferred specification uses per capita real GDP growth, population growth, aging-ratio growth and CPI inflation as key determinants. These cross-country estimates are then applied to Japan to generate fitted values, residual patterns and counterfactual simulations, allowing assessment of how Japan’s housing market would have evolved under alternative demographic and macroeconomic scenarios. Findings Cross-country results show that real house price growth is positively associated with per capita income growth and population growth and negatively associated with the pace of population aging; inflation is not robust. Applying the model to Japan reveals that its long-run downturn aligns closely with the evolution of its fundamentals. Counterfactual simulations indicate that stagnant population growth and rapid aging were the dominant forces behind the depth and persistence of Japan’s housing decline. The results suggest that demographic transition is central to understanding long-run housing-market dynamics in advanced economies. Originality/value This study provides new empirical evidence on Japan’s long-term housing market by integrating demographic aging, population stagnation and economic factors within a unified panel-data framework. Unlike existing studies that examine these forces separately, the authors’ model reveals their combined and persistent impact on regional house price dynamics. The findings contribute to understanding structural determinants of housing markets in aging societies and offer timely policy implications for regions facing similar demographic transitions.