House Prices and Fertility in South Africa: A Spatial Econometric Analysis

Abstract

In this paper, the effect of house prices on fertility is analysed across South African provinces using spatial Durbin model. Empirical results using provincial annual data from 1998 to 2015 indicate that housing market plays an important role in the fertility decision besides female job participation and labour market condition. Particularly, an increase in regional house prices results in a decrease in local and subsequently national fertility rate. However, the spillover effect to adjacent provinces appears to be positive and significant, except in the small housing segment; suggesting that an increase in regional house prices will spur fertility in other regions. Intuitively, house price inflation in a province makes housing relatively affordable in adjacent regions; housing affordability being an important driver of fertility. Alternatively, this positive effect might also capture the income effect felt by homeowners following a rise in house prices, which might in turn be favourable to fertility due to financial edge. The insignificant indirect effect from the small housing segment might reflect the fact that small houses are less likely to be the family residential choice. These findings confirm the importance of spatiotemporal economic behavior in shaping regional fertility in South Africa.