Why do we live bigger? : an analysis of the Norwegian demand for house size

Abstract

In Norway, the average house size has increased with 8.4 m2 between 2001 and 2013. During the same time, households have experienced a huge increase in disposable income, house prices have reach unprecedentedly high levels and the size of households have been reduced. This paper examines which forces determine the owner-occupiers’ demand for house size in Norway and why the average house size has increased between 2001 and 2013. Using household level data from Statistics Norway’s Survey of Living Conditions, I estimate an identical cross-sectional regression for each of the five survey years, regressing the number of square meter house size on income, price, household characteristics, geographical and structure related variables. Inserting average values for all explanatory variables, I find given the explanatory variables, higher predicted house size each survey year. The increase in predicted house size exceeds the increase in the average square meters indicating changes inherent in my explanatory variables combined reduce demand for house size. Specifically, a trend towards smaller households drives down the size of dwellings, all else equal. Instead, macroeconomic variables including the interest rate, credit availability and price expectations can help explain why we live bigger.