The PAP indicator, acronym for Purchasing-Age Population, is an indicator that analyses the state of the housing market. What is the idea behind it?

Two ceilings are drawn based on the demographics of a specific region. The upper ceiling assumes that everyone will at some point buy a home individually, and the lower one assumes that everyone will at some point buy a home as part of a couple.

The PAP is created by counting the number of people aged 25 to 50 in a given year and place, and then cross-referencing that with the number of home sales in the same year and place.

The [PAP/26] is the average number of people per generation, representing the upper limit (26 because there are 26 yearly age cohorts between ages 25 and 50). And the [(PAP/26)/2] is the average number of couples per generation, representing the lower limit (the division by 2 models the potential number of couples).

In the image above, we can see it represented graphically. To summarise, the data can be interpreted as follows:

• If the number of home sales exceeds the upper ceiling, it indicates that the market is in exuberance. This often suggests the formation of a bubble.

• If the number of home sales is below the lower ceiling, it indicates that the market is in a clear deficit situation, pointing to a depressed area and a possible investment opportunity.

• If the number of home sales falls between the two ceilings, it implies that the market is in a stable zone.