"Buy Real Estate", they said; "There's a limited supply!"
And they were right... but there was also unlimited demand, which, in a profitability equation, is the other half.
But that demand is changing; quicker than most realize. The latest global birth rate estimate was 2.2 births per female, which is barely above population replacement levels. (Link) The article suggests that 2050 will be the turning point when the global birth rate falls below 2.1, but that is supposing that the slowing birth rate doesn't continue to slow as much as it has over the past 10 years and returns to an "average" slowing.
Personally, I don't see that happening - I see birth rates slowing more rapidly, as cultural changes continue to place financial freedoms and personal enjoyment of life over having children, along with pollution in the environment destroying the fertility of men and women across the globe so that they can't have kids even if they want to. If the birth rate continues slowing at about 1%/year, as it has since 2014, then the global population decline begins about 12 years earlier, in 2038. Add in a surprise large death event, like the "excess mortality" of the Covid Pandemic, and the tipping point is even earlier.
It's a grim view, perhaps, but in terms of long range planning of a financial future, I would avoid real estate as an investment class. (I am not an investment adviser, nor am I an expert in real estate: this whole article is just an existential crisis thought experiment.)
Once the population begins declining, the demand for real estate will also begin to dry up (excepting local pockets of surplus immigration). Vacant buildings without potential use will decay. Neighborhoods without residents will blight.
The current massive change in use of commercial real estate caused by the work-at-home movement is still sending massive ripples across the commercial real estate market. People would rather work from home if their job allows. Businesses need fewer offices, fewer cubbies, and much less real estate. Right now even, the decline in demand for office property still has banks and property owners on edge over the investments they own, even though the commercial vacancy rate has begun to stabilize.
Will commercial demand return to previous levels - most likely not. Imagine the demand when there are simply fewer people who are even working, let alone as the work-from-home demand increases.
But what about residential? Aren't we in the middle of a housing crisis? Well, we are in the middle of a housing crisis - but for most areas, it's not an availability crisis - it's an affordability crisis. Mortgage rates are high, and housing prices are massively inflated by the "asset" value of a house vs. the practical value of a house. I wouldn't expect this to change much over the next couple of years, though.
We do live in a debt-slavery culture, where you're being milked for every possible cent you're capable of earning in the future in order to struggle for livable conditions in the moment. Renting or owning a house is part of that equation, and you will have your utters tweaked until they're empty.
Soon enough, though, there simply won't be the people who need or want the space. Even now, children are living longer with their parents because they can't afford houses. Parents are moving in with their children because they have to sell their houses to afford retirement (or other incidentals of aging). Imagine the slow down when there simply isn't anyone who wants to buy a house, and the rentals are vacant because there aren't enough people to rent them?
A lot of this is already happening, but is masked by other financial interests. AirBNB and other such ventures have consumed a portion of the residential market that would otherwise be available for purchase or rental and might be hiding any overall decrease in demand. What would housing demand and prices be like currently in tourist destinations without these ventures? It's not that this is necessarily a bad thing, but it does hide the true demand levels.
WHO suggests these new population trends start 25 years from now. I firmly believe it's only 10-15 years out. Are you taking out mortgages to buy rental properties? Are you developing a commercial property that you'll have to lease out? The time to adjust to these changing world conditions might be right now. The asset value of real estate can't be supported forever when these new conditions begin surfacing; there simply won't be the demand to sustain the value, and property costs a good deal of money to maintain. If the values of property don't continue to increase, then holding property becomes a losing position, financially, unless the property somehow maintains a high demand worthy of continued maintenance investment for use.
So what does this mean for Architecture? Unfortunately, it likely means a slowing of new design and construction. More focus will be placed on converting buildings to different uses, and maintaining existing buildings. This isn't necessarily a bad thing, and could be a good thing, particularly if the change in value of properties, and the mentality of the real estate market changes from a purpose of profit extraction, to a greater consideration of the property's use and its future adaptability to other uses.
Eventually, I'll have to add robots and climate disasters into this argument to evaluate it yet again. Another day...
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