Modeling Household Formation and Housing Demand in Denmark

02-12-2013

The DREAM group has developed the individual based microsimulation model SMILE, which project the housing demand on the Danish housing market. The purpose is to provide a basis for evaluation the future housing demand.

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Abstract

The DREAM group has developed the individual based microsimulation model SMILE (Simulation Model for Individual Lifecycle Evaluation), which project the housing demand on the Danish housing market. The purpose is to provide a basis for evaluation the future housing demand. The microsimulation model consists of a demographic module and a housing module. The demographic module predicts the household structure of the Danish population, which cause a population projection divided on location/province, gender, age, origin, education, labour market status, family structure (i.e. couples or singles) and the number of children in the family. Such projection has not previously existed in Denmark. The housing module predicts the housing demands on basis of the household structure and is described by the housing locations (province and town size), owner and rental status (housing type), use (physical use), area (housing size) and construction year (housing age).

This report documents the model and consequently the methods and data basis of the prediction. It also presents results for the predictions baseline scenario, which uses the initial population and housing stock of 2010 as well as incidents and behaviour within a historical period. The baseline scenario ends in year 2040.

An expected increase in the number of households is projected to raise housing demand going forward. The increase in housing demand corresponds to a net growth in the housing stock of 11,775 dwellings per year during the projection period, if the rise in demand is to be met. About two-thirds of the increased housing demand towards 2040 can be explained by a generally growing population. The remaining third can be attributed to changing household patterns, with a growing share of the population living in single-adult households.

Population ageing and migration towards urban areas increase the demand for rental housing and multi-storey dwellings.