Determinants of Housing Demand in Urban Areas of Pakistan: Evidence from the PSLM

Ayaz Ahmad, Nasir Iqbal, Rehana Siddiqui


The study attempts to investigate the determinants of housing
demand in urban areas of Pakistan. The empirical analysis is carried out
using the Pakistan Social and Living Standard Measurement (PSLM) survey
2004-05 and 2010-11. The hedonic price model is used for the estimation
of house prices. In order to control the selectivity bias between the
tenure choice and the quantity of housing services demanded, Heckman's
two-step selection procedure is used. The empirical analysis shows that
housing price and income (temporary and permanent) play an important
role in the determination of the housing units' demand. An increase in
houses' prices causes decrease in demand for the housing units while the
housing demand increases when the permanent income increases. On the
face of change or increase in the transitory income, the demand for
housing units remains static, since people do not desire to make
long-term decisions based on volatile income. To manage rising housing
demand, government should focus on developing effective and enforced
price control mechanisms. Keywords: Urban Housing Demand, PSLM, Pakistan

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