World Population Trends Raise Red Flags For Real Estate
Updated: Oct 16, 2020
An alarming trend that is now being monitored is the possibility of population decrease. Specifically, economists noticed the growth rate of the world population was slowing, and recent birthing trends suggest the trend will continue. Family sizes across the world have decreased, and women are giving birth much later in life which limits the number of children they have. Fertility rates have decreased significantly from 1950 to 2017, decreasing from 4.1 to 2.4. If the number falls below 2.1, then the size of the population starts to fall. And by 2100, the fertility rate is expected to fall to 1.7, as projected by the University of Washington's Institute for Health Metrics and Evaluation.
According to researchers the world population is expected to reach its peak at 9.7 billion people in 2064, and will decrease to 8.8 billion by 2100. The majority of the growth being brought by developing nations with high infant mortality rates.
This trend is believed to stem from opportunities created for women in higher education and professional careers that delay women from starting families, thus limiting the number of children they have. In most developed countries, the fertility rates as of 2020 are below 2.1.
CIA World Factbook 2020 Figures:
Germany - 1.47
Switzerland - 1.57
Canada - 1.57
Russia - 1.60
China - 1.60
Brazil - 1.73
Australia - 1.74
Belgium - 1.77
Denmark - 1.78
Norway - 1.84
United States - 1.84
United Kingdom - 1.86
Sweden - 1.87
Ireland - 1.94
Turkey - 1.96
Iceland - 1.97
These are populations that will fall if the fertility rate does not increase to 2.1. This will cause an alarming shift in our economies as there are fewer younger people and an increasing aging population. More and more of government budgets will be devoted to social welfare for the elderly, and countries will likely need to become more accepting of migrants to keep workforce populations steady. Economies overall will shrink, and there will be drastic shifts in lifestyle.
Real estate is believed to be a safe investment. Why? Because the market always goes up. Why? "Overpopulation". Well, well, well, things just got interesting. If populations fall, and unless something changes they will fall, what happens to real estate? Fewer people purchasing homes leads to more homes on the market, and supply/demand dictate that prices will fall if there are more sellers than buyers. And unlike real estate crashes such as 2008, where properties lost value overnight, this change will be a slow burn. Imagine a steadily decreasing population for 50 years, each year the economy shrinks as there are fewer people.
The world population will grow until 2064 according to researchers, but developed countries are predicted to peak and fall much sooner. A specific date can't be certain as immigration can be used to increase country population. Thus it would be beneficial for most developed countries to adopt immigration policies that encouraged migration to their state.
After 2064, the world will face more widescale issues as immigration cannot be used to grow the world economy, unless we discover and invite aliens. The world economy will decrease as the population decreases, after all, each individual contributing to a society is what makes the society grow. Thus if there are fewer people to contribute, we will shrink. And that could have detrimental consequences in all industries, not just real estate.