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Automotive Engineer

Does Anyone Know How Changing Demographics Will Affect House Prices?

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I was reading a different forum about how in many advanced nations, the birth rates are falling bellow replacement level. In other words, there are fewer children per generation.

I would expect with a decreasing population house prices would decrease.

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I think demography is only part of it. The type of household is also important, with more people forming smaller households now. Immigration is also a factor, both in terms of the number of immigrants vs. emigrants and that many immigrants are younger and starting families. I do wonder about European immigration though and how it will compare to previous waves of immigration. Given how cheap flights are and how easy it is to keep ties with home through the internet we might see very different patterns. Perhaps more temporary immigration with people returning to their home countries at some point? I've no evidence for this, but given freedom of movement and the relative ease of relocating in Europe I would expect the situation to be a bit more fluid than in the past.

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We're importing more people than we're losing through low birth rates, so the net situation is a population increase, which is an upward pressure on house prices, as wages are pushed down and capital values increase.

Broadly speaking the providers of labour lose out through net immigration and the holders of capital gain from it.

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I was reading a different forum about how in many advanced nations, the birth rates are falling bellow replacement level. In other words, there are fewer children per generation.

I would expect with a decreasing population house prices would decrease.

see Barker review 2004 on supply & demographics. Then factor in much higher than expected subsequent population growth & much lower than expected supply, due in part to financial collapse and ongoing supply deficit.

http://news.bbc.co.uk/nol/shared/bsp/hi/pdfs/17_03_04_barker_review.pdf

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We're importing more people than we're losing through low birth rates, so the net situation is a population increase, which is an upward pressure on house prices, as wages are pushed down and capital values increase.

Broadly speaking the providers of labour lose out through net immigration and the holders of capital gain from it.

Surely that's immoral. Allowing large inflows of immigrants to replace the local population will end up with the English as a minority in their own country.

Also, lot's of immigrants from Europe (and the rest of the world) will push down wages and push up rents.

In Japan, they have a massive depopulation problem, this is creating ghost towns and deflating house prices. Unlike in here, the Japanese do not import immigrants to make the shortfall.

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Surely that's immoral. Allowing large inflows of immigrants to replace the local population will end up with the English as a minority in their own country.

Also, lot's of immigrants from Europe (and the rest of the world) will push down wages and push up rents.

In Japan, they have a massive depopulation problem, this is creating ghost towns and deflating house prices. Unlike in here, the Japanese do not import immigrants to make the shortfall.

My wife who has no capital is a supporter of immigration. My mother who has plenty of capital and doesn't work is against it. Both would say that they've arrived at their positions through a moral rather than economic thought process. Economically they're each supporting a view that is against their self interest :)

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My wife who has no capital is a supporter of immigration. My mother who has plenty of capital and doesn't work is against it. Both would say that they've arrived at their positions through a moral rather than economic thought process. Economically they're each supporting a view that is against their self interest :)

How bizarre

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I think the bigger issue is that as the number of people clearly disadvantaged by high prices (generally younger) is set to increase vs those who gain from high prices (generally older) then we'll see some meaningful shifts in policy from politicians looking to appease voters.

Unfortunately, given the chance this is likely to take the form of HtB (Help the Banks) with taxpayer cash/deficits rather than dropping the monetary policies that push up asset prices, dumping the bill largely on the generation down the line. Whether or not the electorate will have the smarts to see through this though, is open to debate.

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I think the bigger issue is that as the number of people clearly disadvantaged by high prices (generally younger) is set to increase vs those who gain from high prices (generally older) then we'll see some meaningful shifts in policy from politicians looking to appease voters.

Unfortunately, given the chance this is likely to take the form of HtB (Help the Banks) with taxpayer cash/deficits rather than dropping the monetary policies that push up asset prices, dumping the bill largely on the generation down the line. Whether or not the electorate will have the smarts to see through this though, is open to debate.

Well HTB has had some up take in London and the S/E overall the numbers are meaningless ,what effect it may have/have had on sentiment from the sellers perspective though is a different matter

I would say other than those gambling on HPI in London all the schemes have been a flop that would suggest that the section of the electorate these measures were meant to appease have smelt a rat

Edited by long time lurking

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Common sense tells you....those two hard working people scraping it together slave to the house price boom will have fewer kids or maybe none at all.......the rest will see that their kids and the numbers they have are their prosperity because property prosperity is unobtainable to them.......the rich asset holders and descendants of property owners will end up paying for those that were locked out and the keys thrown away......happy days ahead.

Not what or who you are or even what you know or who you know.... but where and who you were born to.....breakdown of society?

Edited by winkie

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Sentiment is everything. The problem is that the media is currently (owned by) beholden to the older generations of boomers/pensioners who tend to have money to spend and tend to vote. The media can sell scare stories and stories about how HTB helps young people etc. What we need is a media campaign which gets through to young people, dispelling the myths that house prices will always remain high because that's just the way it is. Once there is momentum then things change. And demographics is only going in one direction. This should be easy in this day and age because so much propaganda information is available on the internet and the younger generation are more technologically savvy. However, there is still a monopoly on online information and until that changes, young people will believe there is no other option and HPI is the only way to get rich.

Edited by fru-gal

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Just taking Northampton as an example - the demographic boom here is coming from poor Eastern European immigrants. Not sure how they're going to prop up prices that young locals can't afford? So maybe add Northampton to Scarborough as a place with cheap housing in the future (as well as most of the UK...!).

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Basically, my question was coming from reading the Spanish version of the HPC forum www.burbuja.info, as I have been contemplating buying in Spain since properties there seem to me dirt cheap.

The thing is, the locals don't seem to think prices in Spain are cheap. On the contrary, they think they are still expensive, this even after a brutal market correction in 08-09.

The main arguments in burbuja, go like this:

-Spains demographics look like an inverted pyramid

-Young Spaniards are emigrating due to lack of jobs or underpaid jobs

-And that those that work earn a measly 800 euro a month, whilst pensions are going to be raised to 1200

the housing market is going to collapse further still. As Spains Baby Boom population reach retirement age, and there is an insufficient worker base to pay for those pensions, nor is there demand for all the surplus houses, something will have to give way.

Either pensions go, or the young do. At which point there is no market to sell houses in Spain and their value goes to 0.

This is a simplification ofcourse.

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Spain doesnt have a supply problem as we do in UK

In fact they had/have an over-supply problem hence bubble collapsed.

It will take a lot of (English) immigrants to resolve that one (depending on area ofc)

Plus ofc Euro has collapsed v sterling as per divergent monetary policy et al. That may change/ECB policy wont last forever/Euro may still implode/sterling c/a imbalance may catch up with it etc Buying assets overseas is partly a currency play.

Edited by R K

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