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Forecasting the evolution of the residential real-estate market on the longer term is a daunting task that we aim to improve by looking into the relationship between home prices and real-estate transactions and several demographic indicators: number of marriages, divorces, birth-rates and death-rates, as well as several other factors, including income, employment and interest-rates. By looking at the monthly data for Romania between April 2009 and September 2016, and using a path analysis approach, we tested our proposed model and, after making several adjustments to it in order to increase its power, we found a way to relate the demographic indicators, prices and transactions that could provide assistance both in explaining the dynamics of the real-estate market and aid in making forecasts that related to these indicators. Our main results point to a negative relationship between prices and transactions, which is in line with our expectations and current economic theory. We also find that income has a positive relationship with the number of transactions and a negative one with home prices. However, the latter can be fully explained by a mediation effect though the former, and thus there is a strong possibility that changes in income have an indirect effect on prices, by their effect on transactions. In terms of demographics indicators, divorces are positively related to prices, births are positively related with transactions, while marriages have an inverse relationship with the number of transactions and we failed to find any indicators that deaths have a strong relationship to either prices or transactions. These effects are relatively smaller than those of income or employment, but nonetheless on the longer term they add up and, after all, demographic trends change slower. We conclude that marriages, divorces and births are related to changes in home prices and number of transactions in the Romanian real-estate market and that their long-term trends could be important in assessing the future of this market.

DEMOGRAPHIC AND ECONOMIC FACTORS INFLUENCING THE REAL-ESTATE MARKET IN ROMANIA