On-top of that, the demo was based off of an older build of RE7 and was developed separately from the main game.
However, from my understanding of it is that the RE Engine handles optimization and prioritizes performance over graphical fidelity. RE7 is aiming to run at 60fps on both Xbox One & PS4, what I think the RE Engine does is optimize the graphics when you reach 'load doors' (you can see these in the demo and lantern gameplay), but it forms the graphical niceness based around what can be done in a loaded area while still hitting 60fps on the platform.
And of course as the demo is its own separate thing done much earlier in development, and Capcom is polishing RE7 right now, while I don't think it'll look as good as some of the stuff the engine is capable of, I do think it'll look better than the demo.
For each area they show, they have much nicer looking versions of the areas they release screens from, so they do have high quality assets of what they use in RE7, and if the RE Engine works as I suspect it does, on a good PC RE7 should look pretty good.
One thing to keep in mind is all footage released so far (and the demo) is from the PS4 version (as the game has VR on PS4, and Sony is obviously helping some with its funding).
