The effect of young, single person households on apartment prices: an instrument variable approach

There is an increasing evidence in the literature that the average household size is declining in many western countries with people living alone more often and maintaining a single or solo household. This trend can affect the housing market in many ways including an increase in demand for housing and property prices. However, little knowledge exists on what effects singles can have on property values. This study, using a two stage least square (2SLS) regression model, estimates the impact of young (aged 34 years or less), single person households on apartment prices in Helsinki, Finland. Results show that a 1% increase of young, single person household in a neighbourhood leads to a 0.51% increase of apartment prices. This means, for example, that if young, single person household increases by 10% in an area, the average value (€196,348.10) of an apartment increases by €10,061. The finding implies, ceteris paribus, that the apartment market will continue to experience an upsurge if the current trend of decline in household sizes continue.