Federal Reserve: The Baby Boom: Predictability In House Prices And Interest Rates.

[CrashConnoisseur]

'The Baby Boom: Predictability in House Prices and Interest Rates' [744KB PDF]:

http://www.federalreserve.gov/pubs/ifdp/2005/847/ifdp847.pdf

Abstract: This paper explores the baby boom's impact on U.S. house prices and interest rates in the post-war 20th century and beyond. Using a simple Lucas asset pricing model, I quantitatively account for the increase in real house prices, the path of real interest rates, and the timing of low-frequency fluctuations in real house prices. The model predicts that the primary force underlying the evolution of real house prices is the systematic and predictable changes in the working age population driven by the baby boom. The model is calibrated to U.S. data and tested on international data. One surprising success of the model is its ability to predict the boom and bust in Japanese real estate markets around 1974 and 1990.

Take a look at 'Figure 16. United Kingdom: Simulated and Real House Prices'.

[CrashConnoisseur]

Here's the section on the UK...

8.2 The United Kingdom

Real house prices in the United Kingdom are thought to be more volatile than real house price in the United States. Figure 14 shows that not only is this true but that the peaks in real house prices are very close to the peaks in U.S. house prices (the 1979 peak is slightly delayed). Many reasons have been given for the differences (e.g. the relative urbanization of the United Kingdom, stricter land use regulations ect.); however, once again, demographics appear to be playing a role. Figure 15 shows births in the United Kingdom versus the population under age five for the United States from 1938 through 1960 (essentially the baby boom years for the United States). Note the sharpness of the baby boom in the United Kingdom relative to that in the United States. The peak of the baby boom occurs right after the end of WWII, matching the common intuition that baby booms occur right after wars, and then drops off sharply not recovering, in levels, until the mid 1960s when they have a second, though smaller in per capita terms, baby boom.

Figure 16 shows real house prices in the United Kingdom versus data from the simulated model. The model when faced with the sharp demographic changes from the United Kingdom spits out house prices with substantially more volatility than is observed in the U.S. data. The 1979 house price episode is not matched by the model and the 1973 peak is predicted two years early; however, with those two modest exceptions the model does very well at matching prices in the United Kingdom.

The predictions for prices going forward differ somewhat between the United States and the United Kingdom. Because the United Kingdom had a second substantial boom in the mid-1960s price appreciation is predicted to slow in the near-term but not actually turn negative until around the year 2010. The turndown in 2005 in the house price data does not on the surface appear to be matched by the model. However, notice that the model predicts a short-lived turn-down in house prices in 2003. A different calibration of the model would likely move this event. For example, in calibrating the model for the United States, the final peak in house prices is predicted to occur anytime between 2005 and 2010 depending on the level of intertemporal substitution and the time discount rate. Therefore, the possibility that the current turn-down is associated with either the final model peak or the short-lived pause in the model can not be ruled out.

[bpw]

Thanks for this, it provides another piece of the jigsaw. I have to confess that demographics has not been on my list of key cofactors for house price appreciation. This paper convinces me that the boomer generation are one coordinate in determination of future price trends. The maths will be a little daunting for most but you can skip those sections and get the main message from later sections.

At first sight, I thought this paper leant too heavily on demographics, ignoring the effects of other cofactors like interest rates, GDP, pensioners savings behavior, oil prices etc. However, after some thought you could argue they are all dependent variables, and that the 'kernel' parameters are indeed demand driven - i.e. related to the number of people in work and therefore creating new 'value' and earning. Of course, this fails to explain the 2001 equities crash and its' effect on investment behviours. The later clearly has an effect which is not directly related to boomers, and this makes me wonder about the ability of the model to predict the 'current future'. All models are influenced by observations. Does this one account for the dot com crash? I doubt it.

One question is therefore whether the likes of Kiyosaki are correct in thinking that cash rich boomers will support house prices over the next two decades. This paper suggests his argiments are deeply flawed and I now feel inclined to question his wisdom. The paper is clearly highlighting that retired boomers dont create value and therefore their money is effectively old money - not 'new value'.

What do others think?

Bob

Edited January 1, 2006 by bpw

[Realistbear]

Given the possibility of a crash or a long term plateau due to demographics it seems that the renting option is best. The aging boomers are starting to think "downsizing" which means more larger homes will come on the market over the course of the next 10 years keeping supply high and demand low.

It seems that HPI has been caught by affordability problems, demographics and the economic cycle.

With some Building Societies paying 6% on savings it makes sense to deposit the proceeds of sale from a house, rent a far better property for less than you would pay for a mortgage and get back into the market in 3 or 4 years time. For many, the proceeds of sale will cover the rent making life quite comfortable!

[EmpiricalBear]

This is uncanny.

I just saw a similar graph in the book I've been reading, literally a few hours before this thread went up.

In that case it shows the S&P 500 correlated with the number of people in the 45-49 age group in the US for the period up until 1999. It occurred to me that housing assets might have replaced stocks post 2000.

[brainclamp]

This is uncanny.

I just saw a similar graph in the book I've been reading, literally a few hours before this thread went up.

In that case it shows the S&P 500 correlated with the number of people in the 45-49 age group in the US for the period up until 1999. It occurred to me that housing assets might have replaced stocks post 2000.

Nonsense.

Its very clear whats driving the boom - millions added to the labour pool causing relative wages to drop and houseprices to rise. This is occuring in the US, Ireland and UK.

Edited January 1, 2006 by brainclamp

[EmpiricalBear]

Figure 18 in the paper doesn't support the 3 year plateau followed by a long decline, it shows a peak followed by a long decline. I certainly hope this is what happens

I find this interesting, because it is similar to another graph I saw which correlated the S&P 500 with the population of 45-49 year olds in the US up to 1999.

Its another version of the "wall of money" argument I was hearing 1998-2000 from my banking friends who argued that stock prices were going to remain high as there was "no where else to put pension savings".

So this shows that the relationship holds for a variety of different asset classes. I guess that it still holds for stock prices, but you'd need to map in the downturn for 2000-2004 stocks.

With some Building Societies paying 6% on savings

Who?

Edited January 1, 2006 by 2MeterBear

[Adam]

Oh god. Its saying its not worth buying until 2030?

Will housing not be a viable place to put my money until I retire? Unless of course I want to fund someone else's retirement.

Speaking as a bear, this guy is a grizzly and i'm paddington. It's enough to put me off property till im 65.

[BandWagon]

Nonsense.

Its very clear whats driving the boom - millions added to the labour pool causing relative wages to drop and houseprices to rise. This is occuring in the US, Ireland and UK.

You have made the statement that millions added to the labour market has caused wages to drop and house prices to rise.

What is the connection between falling wages and rising house prices?

This makes no sense to me. Perhaps you could clarify.

You keep rattling on about how immigration has caused massive house price rises, yet you seem to severely lack evidence to support your views.

Could you please post some evidence to show how immigrants, who in many cases can barely afford to buy the ticket to get here, are causing massive house price inflation?

Edited January 1, 2006 by BandWagon

[Mikael_Gorbachev]

"It seems that HPI has been caught by affordability problems, demographics and the economic cycle. "

Demographics: not yet ! They are STILL BULLISH.

Boomers are still at/near their peak earnings.

The are thinking about their retirement, and have shifted part of their savings into property, at a time when banks are lending aggressively. And so a small deposit can be geared with alot of debt, and so shifting say £1 billion of equity into property, can result in £5-10 billion of property purchases.

Once the boomers realise that these investments are not productive, they will begin to slow or reverse that investing trend. If they realise that the sector is HIGH RISK because the demographic look very negative AFTER 2010, they will see that instead of capital gains, their investments will be dead money for years or even likely to show YEARS of capital losses. When that realisation sinks in, there will be attempt to shift the capital back out of Property. A shift of that magnitude could easily cause a crash.

The changes in sentiment that are needed to bring about "flight from property" are:

+ First, a realisation that current yields are poor, and property only works as a long term investment,

+ Later, people will begin to realise that property is also a POOR long term investment,

+ Meantime, banks will also see that their money is at risk, and move to tighten lending policies

+ Finally, there will be a panic to GET OUT, triggering a likely price slide

This process may take years. When will it start? The first phase is happening now. We are awaiting the bank tightening, and the realisation that the medium to long term potential for property investments is poor.

= =

I AGREE that Renting is the smart move.

Some here should start to realise that renting may continue to be the smart move for many years.

Dr Bubb,

I agree that demographics plays a key role in medium to long term property prices. What do you think will be the role of immigration in all this? In my opinion, after 2010, when Alright_Jack start to realise that immigration is necessary and start welcoming immigrants (e.g. Germany now has done a complete U turn on immigration policy and the general population is in support of it due to labour shartages that even the far right finds it hard to convince people otherwise), don't you think that due to a head start of the west in industrialisation and availability of knowledge based jobs that this will continue to attarct people from other countries. Or do you think that 'would be immigrants' will stick to their countries due to increasing living standards and growing industry in their own countries?

[Guest]

You keep rattling on about how immigration has caused massive house price rises, yet you seem to severely lack evidence to support your views.

Blimey, BandWagon. It's because for each immigrant clinging to the underside of the EuroStar, there is one Englishman who is prepared to buy-to-let the said immigrant a £300,000 "luxury" "executive" "apartment" in London.

Oh, hang on... My friend who hired the 60 latvians for her lorry firm in the North West says they squeezed them in cheaply in "basic" accomodation somewhere in Manchester, bussing them to work as necessary. Oh, and they're off home next week, so you can minus sixty from Uncle Tony's statistics for next month.

[BuyingBear]

What do others think?

We have a wonderful new centralised planning control thanks to ODPM, it literally is 'central planning' in the sense that Prescott can impose targets on towns or counties to build a set number of homes. I was looking through some Unitary Development Plan's (UDP) for various areas, I was looking into some of the original new towns like Telford that never actually met their population targets, falling short of their 250k target by 40% in some cases. For Telford I thought this could maybe explained by the neighbouring areas around north Birmingham, like Wolverhampton, i.e. that the over-spill didn't move due to employment reasons, but they're also showing population falls.

The following town near Wolverhampton registered a 2.3% decrease in population over 1991-2001, ONS predictions are for a further 2% fall up to 2011. The age structure is (typically) odd too, with fewer 30-44 compared to people 45 to retirement age. No wonder the government can claim smaller class sizes for example, or various other trends, this is simply on the back of the demographics in the many cases.

"The population of the Borough at the 2001 Census was 253,499. This was a slight decrease (2.3%) from the figure of 259,488 for 1991. Underlying this trend for decline in Walsall's population is a tendency for net loss through migration, partly offset by a small natural increase in the local population. It should be noted, however, that the net migration figures are made up of a complex pattern of gross flows in both directions.

Walsall has an age structure which is broadly similar to the national average, but with a slightly higher proportion of children aged up to 14, a lower share of 30-44 year olds and a higher proportion of people aged between 45 and retirement. The population is also increasingly ageing: the numbers over retirement age, particularly over 75 years, have continued to increase significantly in recent years.

Despite the fall in population, the number of households in the Borough has continued to increase, from 97,849 in the 1991 Census to 101,333 in 2001. The apparent paradox of more households within a declining population is explained by a reduction in average household size, which in turn is due to a complex set of factors, including the changing age structure of the population and social trends such as fewer marriages and an increasing divorce rate.

The 1996-based population projections published by the Office for National Statistics (ONS) suggested that the population would continue to fall, to 248,300 by 2011. The projections also consider the future age structure of the population, suggesting that in Walsall, by 2011, there will be notable falls in the 0-15 and 25-44 age groups and significant increases amongst more elderly groups.

This was John Stonehouse's stomping ground, poor man.

However it makes me doubt the census figures in some cases, even after the weightings for under-reporting are added, there was the case of the "missing men" after the 2001 results were revealed, people assumed they were all in Ibiza or something. However men who are cohabitting for example don't fill in the forms because they think the data is passed onto social services and will be used as a benefit ruse, so some areas appear to show a dearth of men. The 2001 census doesn't reflect the increase of economic migration or EU expansion, it makes you appreciate how hard the government is having to try to reverse the aging process!

- added links to portal.

Edited January 1, 2006 by BuyingBear

[UNSHURE]

Thanks for this, it provides another piece of the jigsaw. I have to confess that demographics has not been on my list of key cofactors for house price appreciation. This paper convinces me that the boomer generation are one coordinate in determination of future price trends. The maths will be a little daunting for most but you can skip those sections and get the main message from later sections.

At first sight, I thought this paper leant too heavily on demographics, ignoring the effects of other cofactors like interest rates, GDP, pensioners savings behavior, oil prices etc. However, after some thought you could argue they are all dependent variables, and that the 'kernel' parameters are indeed demand driven - i.e. related to the number of people in work and therefore creating new 'value' and earning. Of course, this fails to explain the 2001 equities crash and its' effect on investment behviours. The later clearly has an effect which is not directly related to boomers, and this makes me wonder about the ability of the model to predict the 'current future'. All models are influenced by observations. Does this one account for the dot com crash? I doubt it.

One question is therefore whether the likes of Kiyosaki are correct in thinking that cash rich boomers will support house prices over the next two decades. This paper suggests his argiments are deeply flawed and I now feel inclined to question his wisdom. The paper is clearly highlighting that retired boomers dont create value and therefore their money is effectively old money - not 'new value'.

What do others think?

Bob

Bob

I read a book several years ago entitled ‘The Great Boom Ahead’ (I think). It was written during the recession of the early 90’s. The author used ‘demographic trends’ to argue that the recession would soon be over and the late 90’s, and the first part of the 2000’s would experience an unprecedented economic boom.

He argued that when a baby boom generation occurs, it is always accompanied by a major period of technological innovation when the ‘boomers’ reach middle age. Looking back, from the industrial revolution onwards, technological advancement and population growth go ‘hand in hand’. Our generation has seen the ‘information revolution’. The early 20th century experienced the automobile and radio. You could go back infinitum. Railways; Factory Production; Mechanisation in Agriculture; the printing press etc. etc.

The author argued that, when the ‘technological revolution’ is in full swing, many new firms are started up. A lot of them are certain flops. Some have ‘sound ideas’ but do not have the ability to exploit those ideas commercially. However, this does not stop people from investing in them. The rise and fall of equities , in the ‘dot com boom’, was to a large extent based upon people placing large amounts of money into tecnology related equities.

Eventually, firms start to fail, firms merge and investors lose faith in some firms. The result is a major shakeout. This is what occurred in the ‘Dot Com Boom’. Hope this explains it.

The other thing of note is that the main beneficiaries of such technological advancements are:

- Existing firms that can exploit the new technology. This would explain the growth in the service sector following computerisation and EDI.

- The few giants that emerge from the new technology. For example Microsoft, IBM, Intel etc.

- Smaller firms that can find niche’s in the market for the new technology.

[Yankee]

"It seems that HPI has been caught by affordability problems, demographics and the economic cycle. "

Demographics: are not yet a problem, They are STILL BULLISH !

Boomers are still at/near their peak earnings.

The are thinking about their retirement, and have shifted part of their savings into property, at a time when banks are lending aggressively. And so a small deposit can be geared with alot of debt, and so shifting say £1 billion of equity into property, can result in £5-10 billion of property purchases.

Once the boomers realise that these investments are not productive, they will begin to slow or reverse that investing trend. If they realise that the sector is HIGH RISK because the demographic look very negative AFTER 2010, they will see that instead of capital gains, their investments will be dead money for years or even likely to show YEARS of capital losses. When that realisation sinks in, there will be attempt to shift the capital back out of Property. A shift of that magnitude could easily cause a crash.

The changes in sentiment that are needed to bring about "flight from property" are:

+ First, a realisation that current yields are poor, and property only works as a long term investment,

+ Later, people will begin to realise that property is also a POOR long term investment,

+ Meantime, banks will also see that their money is at risk, and move to tighten lending policies

+ Finally, there will be a panic to GET OUT, triggering a likely price slide

This process may take years. When will it start? The first phase is happening now. We are awaiting the bank tightening, and the realisation that the medium to long term potential for property investments is poor.

= =

I AGREE that Renting is the smart move.

Some here should start to realise that renting may continue to be the smart move for many years.

Dr. B: Are Baby Boomers really "investing" in property, or are they helping their children buy homes? I seem to remember reading a newspaper article (or a post here?) some time back that cited a study showing middle-aged Brits had the least amount of money in savings. I immediately thought, "Of course, because they are spending it on their children's college and on helping them get on the property ladder."

That's what my Baby Boomer friends are doing here in the States. We're also "downsizing." I've had three friends do just that in the last month alone--including a friend in New York City who sold her condo (at a huge profit--she bought it during the last property trough in the early 90s) and moved into an apartment.

Edited January 1, 2006 by Yankee

[oracle]

Nice find, Jeff. I will read it carefully.

I dont know if you saw my thread on Demographics a week or so ago.

Link: http://www.housepricecrash.co.uk/forum/ind...showtopic=21032

I believe Demographics is the single most compelling point in a sensible Bull's argument.

Unfortunately it is seldom raised, perhaps because most bulls have long since moved beyond

rational analysis into "faith in property" as their main reason for investing.

demographics I'm sure is a very important constituent,but the boomers are now at that age where they WILL be dying off from heart attacks/cancer/diabetic or obesity related illnesses.

.....the boomers may have had lots of kids but their kids now only produce 1.7kids per couple,not enough to replenish their numbers,and to boot,these kids will probably be dying off a lot earlier due to bad diet and laziness,couple this with massive debtloads and you can see another round of 1.5 kids per couple isn't entirely unfeasible.....now if this is the case who pays the pensions for those that linger???

It could actually be more bearish than the report suggests if one digs a little deeper.

[brainclamp]

"What do you think will be the role of immigration in all this? In my opinion, after 2010, when Alright_Jack start to realise that immigration is necessary and start welcoming immigrants"

= =

MY VIEW of the impact of immigration on property is unconventional.

To me, it seems that it may be driven in the other direction, and there is a sort of "virtuous cycle" on the way up. The relative strength of the UK economy is what is attracting foreign workers here.

So s strong economy pulls in foreigners, and the recent strength in the economy has been due to Brown's irresponsible expansion of the public sector, and the property-fuel debt boom. If these influences now go pear-shaped, perhaps few workers will be attarcted here, and some may even return home if economic conditions continue to improve in Eastern Europe, or wherever they came from.

I think the property bulls will be disappointed by the impact of immigration in coming years

Is this more wishful thinking?

Immigration flows have never reversed historically.

There may never be any limits, as there is no such thing as a fixed pool of human labour.

Pakistan alone has a projected population of 1 billion people by 2025.

[AgeingBabyBoomer]

Immigration flows have never reversed historically.

Sorry brainclamp - that assertion is plain false

During the 18th Century there was a net outflow of bodies from the UK to the US.

Ireland saw a net emigration outflow for nearly 200 years, until they joined the EU.

(though I think it is still true that more Irish nationals live outside Eire than in it)

I have to agree with the other posters that your obsession with immigration seems

to be just that - an obsession.

I'm not saying your are racist - but maybe xenophobic.

Also, economic migration is a two way street - proof: 'Auf Wiedersehen Pet'

I do believe immigration is occurring to an extent, but don't see the link to high

land/property prices.

I would like to see you start your own threads where you present some real

numbers to back your arguments, rather than some vague impression gleaned

from reading the Express or Mail - with which you then hijack somebody

else's post.

ABB

[UNSHURE]

"It seems that HPI has been caught by affordability problems, demographics and the economic cycle. "

Demographics: are not yet a problem, They are STILL BULLISH !

Boomers are still at/near their peak earnings.

The are thinking about their retirement, and have shifted part of their savings into property, at a time when banks are lending aggressively. And so a small deposit can be geared with alot of debt, and so shifting say £1 billion of equity into property, can result in £5-10 billion of property purchases.

Once the boomers realise that these investments are not productive, they will begin to slow or reverse that investing trend. If they realise that the sector is HIGH RISK because the demographic look very negative AFTER 2010, they will see that instead of capital gains, their investments will be dead money for years or even likely to show YEARS of capital losses. When that realisation sinks in, there will be attempt to shift the capital back out of Property. A shift of that magnitude could easily cause a crash.

The changes in sentiment that are needed to bring about "flight from property" are:

+ First, a realisation that current yields are poor, and property only works as a long term investment,

+ Later, people will begin to realise that property is also a POOR long term investment,

+ Meantime, banks will also see that their money is at risk, and move to tighten lending policies

+ Finally, there will be a panic to GET OUT, triggering a likely price slide

This process may take years. When will it start? The first phase is happening now. We are awaiting the bank tightening, and the realisation that the medium to long term potential for property investments is poor.

= =

I AGREE that Renting is the smart move.

Some here should start to realise that renting may continue to be the smart move for many years.

I read the thread on demographics last week. I am becoming convinced that the demographic issue is key to the way that things will go over the next decade or so. From the standpoint of today, I think that we can predict, with a substantial degree of certainty, that there will be a prolonged economic downturn and ‘House price fall’ at some stage, within the next ten years.

However, I don’t think that we can predict, with any degree of certainty, the timescale, or events that will lead to this. I have put together a few factors which I believe will be features of the next few years. Hope they don’t muddy the waters too much.

Increased volatility.

It is likely that the ‘baby boomers’ will retire in waves. The first, smaller waves of baby boomers will be retiring now. Some will be taking early retirement. The oldest will have already reached retirement age. The largest waves of retirees will occur in the next decade which is only four years from now.

The ‘baby boomers’, who have not yet retired, will be planning retirement. Hence they will be making investments into Pension Funds, Equities, Bonds etc. Some will even be investing into housing. Therefore, at any one snapshot in time, during the next decade, there will be two groups of ‘baby boomers’. Those who have retired and those who are still investing for retirement. It stands to reason that these two groups will be pulling the economy in different directions.

At first, the ‘boomers’ investing for retirement will have the greatest pull (could explain why the HPC has not yet occurred). However, as time moves forward, the weight will shift towards the ‘retired baby boomers’ with their negative impact. In the meantime, the two forces could result in volatility. If retirement comes in waves, rather than a steady stream, each wave will have a negative impact on the economy. As time goes on, the retirement waves will grow stronger. At some point, they will tip the economy into a serious recession.

The point of this is that we might experience some very confusing and conflicting figures for some years to come.

Increased Pressure on Governments

The government is going to have to steadily increase it expenditure on state benefits. Not just on state pensions, but also on healthcare and also on paying the public sector employees pensions (final salary pensions retiring at age 60). We must also consider that the baby boom generation will not only be the largest generation but has always been the most politically active generation.

USA slightly in advance of UK

The USA baby boom is a few years in advance of ours. However, I think that it would be safe to assume that a downturn in the US will have a serious impact on our own economy. Especially share prices!

Immigration issue

The Immigration issue is a double edged sword. The argument is that a large influx of young immigrants will enable the economy to meet all of the benefits that are demanded by the retired baby boomers. However, there is a question about whether an economy in recession will be able to place those people in jobs. Also, many firms are exporting jobs out of the country rather than bringing people in.

Technology Effect of ‘Baby Boom Generation’.

This is where it may be, dare I say it, ‘Different than before’. The ‘baby boom generation’ have brought us information on a scale that would have never been thought possible.

During the last UK recession in the early 1990’s, we did not have the internet or the access to information that we have now. Information should help markets to run more smoothly. However, I can’t help but think that vested interests could use the new ‘information technology’ to spread dis-information. What the overall effect of this will be is uncertain. It could delay a recession. However, I cannot envisage the situation in which it prevents a major recession that has occurred due to a seismic shift in population distribution.

90’s Style Correction

We still cannot completely rule out a 90’s style correction to the Housing Market. This could take place before the full impact of the demographic changes take effect. There have been many strong arguments for this on this forum. Not least the growing debt mountain. We could therefore have a House price correction before the ‘baby boom negative effect’ goes into full swing.

The Unexpected.

Probably the only certainty.

Happy New Year All

[apom]

Is this more wishful thinking?

Immigration flows have never reversed historically.

There may never be any limits, as there is no such thing as a fixed pool of human labour.

Pakistan alone has a projected population of 1 billion people by 2025.

Are imigtation and births outstripping deaths.?

[Mikael_Gorbachev]

Pakistan alone has a projected population of 1 billion people by 2025.

What rubbish. A pakistani goverment official publication.

link: http://www.mopw.gov.pk/publications/pplan/Chap2.htm

Population Size (in million) 144

Births per 1000 Population 30

Annual Population Growth Rate 2.1

Average Family Size (No. of children) 4.8

Population Doubling Time 33

Percentage of Couples Using Contraception 30

Maternal Deaths per 100,000 Births 350-500

GNP per capita (US $.) 429

Source: NIPS, Islamabad January 2002

The reason for this alarming state of affairs is the cumulative effect of decades of neglect. Tragically, our country’s leadership, with the exception of President Ayub Khan, failed to accord sufficient level of priority to the crucial issue of population. Study of the situation in Indonesia makes one realize how a leader’s vision and political will – in this case President Suharto’s – can propel even a large, widely dispersed third world nation towards effecting a successful family planning programme to improve the quality of life of its people. In Iran, ruled by so-called "“Islamic fundamentalists"” a visionary approach has helped launch a truly effective population programme, with family planning even being propagated in mosques by the Imams. In the process, the population growth rate in Iran, which used to be significantly higher, is now well below Pakistan. A comparison drawn with Bangladesh is also depressing.

[Odakyu-sen]

And so it begins....

Population of Japan falls for first time on record

12/23/2005

The Asahi Shimbun

For the first time in 106 years of recordkeeping, the population of peacetime Japan has dropped.

That is the gist of statistics released Thursday by the Ministry of Health, Labor and Welfare that project more deaths among Japanese than births this year.

The ministry predicts the number of deaths will total 1.077 million while the number of births will total 1.067 million.

It is the highest number of deaths since 1947 and the lowest number of births since the current form of the count began in 1899, excluding the World War II years.

The decline in population just among Japanese is expected to be about 10,000. If foreign residents are included in the count, the decline is estimated at about 4,000.

While experts had long warned the population would decrease because of a falling birthrate and an increasingly aging society, the decline seems to have come earlier than initially predicted.

The National Institute of Population and Social Security Research had said the population, which is now about 128 million, would likely start to drop by 2007 and fall to 100 million by 2050.

This huge drop in population is seen as a problem requiring policy adjustments over a wide range of issues, including employment and social welfare.

According to the estimates released Thursday by the health ministry, total births in 2005 dropped by 44,000 births from 2004.

This is partly because the population of potential mothers is in decline. Women born in the late 1970s, when the declining-birthrate trend began, are now entering their late 20s.

Experts predict that births will fall under 1 million in 2014.

Meanwhile, the number of deaths in 2005 showed an increase of 48,000 from last year.

Health ministry officials suspect the influenza epidemic this spring, which is believed to have led to about 20,000 deaths, is the main reason behind the overall decline in the population this year.

The population decline is expected to accelerate because of the baby boomer demographic. By 2040, when the baby boomers enter their 90s, experts predict about 1.7 million deaths a year.

Concerns about an eventual decline in the population started about 30 years ago.

In 1974, the overall fertility rate, which represents the average number of children a woman gives birth to during her lifetime, fell under 2.1, which is considered the level necessary for maintaining a stable population.

Government policy to encourage couples to have children began in earnest after 1989 when the fertility rate hit a postwar low of 1.57.

However, there has been no stop to the declining birthrate, which reached 1.29 last year.(IHT/Asahi: December 23,2005)

------ And I don't think the Japanese government is going to open the floodgates to immigration. (I guess that's why they're so obsessed with the development of home-helper robots)----

[UNSHURE]

Good points.

I will pick on only one:

"USA slightly in advance of UK

The USA baby boom is a few years in advance of ours. However, I think that it would be safe to assume that a downturn in the US will have a serious impact on our own economy. Especially share prices!"

I do agree.

But please note: we have already seen a demographics-related collapse. Where?

In Japan. What happened? They had booming stocks and property until 1990, and since then

have suffered a 15 year slide, which has taken an average of about 70% off property values.

A grim and worrying example. But the rest of the world has done okay, and benefitted from Japan's

need to export its capital, and get a better return from economies with more promising demographics.

Agree. Japan is a good modern example of the demographic effect of a 'boom generation' reaching retirement. When Japan went into this 15 year recession in the early 90's, the Western economies also went into recession. The difference being that Japan remained in recession whilst the Western economies came screeming out of the recession into a prolonged period of boom. The reason for this is that the 'Western boomer generation' had reached it's middle age 'peak spending/income' period'. The Japan 'boomer generation had reached it's 'retirement period'.

The negative effects of the Japan 'retirement boomer generation' kept it in recession until very recently. However, the positive effects of the 'Western Boomer Generations' enabled the US, UK etc. to come out of the recession and resume the upward trend of economic growth fron the mid 90's.

When the US 'boomer retirement effect' causes it's economy to go into long term recession (or even slump), their will be a negative effect on US asset markets. In particular- equities. Also, the US is the worlds largest economy. A recession in the US will have an impact throughout the whole global economy. The fall in US equity prices is most likely going to cause a fall in global equity markets. Even the markets of the Far East that are experiencing 'positive population effects' will likely be affected.

However, the difference is then likely to be a reversal of the mid 90's. The Eastern economies will shake off the recession whilst the Western economies will go into a more prolonged recession (similar to the one that Japan has just experienced).

The point I am making is that, by the time the 'US effect' on the world economy, has receeded, the UK 'baby boomer negative effect' will have taken hold. Therefore, it is the US 'demographic distribution' that is the more important one to watch.

By the turn of this decade, it is probable that the US economy will be in serious difficulties due the the 'baby boon negative effect'. The precise year that this will happen is uncertain. Possibly between 2008 and 2012. However, as I stated in the last reply, we cannot rule out a cyclical recession occuring before these effects take place.

Another point. If this baby boom scenario does take place, although it will be a bad recession, it will eventually end.

[brainclamp]

Yeah, yeah - I was wrong - there will be an extra 1.36 billion muslims by 2025.

Pakistans population with a fertility rate of 5 children per woman will grow by about 133 million between 1995 and 2025.

http://www.iiasa.ac.at/Research/LUC/Papers/gkh1/chap1.htm

But the orginal point was there would be some sort of reversal of flows as the economy downturns. It strikes me as rather weak thinking. It has never really occured in the past, unless of course you get a calamity along the lines of a potatoe famine, as people settle down in thier host country.

What rubbish. A pakistani goverment official publication.

link: http://www.mopw.gov.pk/publications/pplan/Chap2.htm

Population Size (in million) 144

Births per 1000 Population 30

Annual Population Growth Rate 2.1

Average Family Size (No. of children) 4.8

Population Doubling Time 33

Percentage of Couples Using Contraception 30

Maternal Deaths per 100,000 Births 350-500

GNP per capita (US $.) 429

Source: NIPS, Islamabad January 2002

The reason for this alarming state of affairs is the cumulative effect of decades of neglect. Tragically, our country’s leadership, with the exception of President Ayub Khan, failed to accord sufficient level of priority to the crucial issue of population. Study of the situation in Indonesia makes one realize how a leader’s vision and political will – in this case President Suharto’s – can propel even a large, widely dispersed third world nation towards effecting a successful family planning programme to improve the quality of life of its people. In Iran, ruled by so-called "“Islamic fundamentalists"” a visionary approach has helped launch a truly effective population programme, with family planning even being propagated in mosques by the Imams. In the process, the population growth rate in Iran, which used to be significantly higher, is now well below Pakistan. A comparison drawn with Bangladesh is also depressing.

[Yankee]

Yankee, Your:

"Dr. B: Are Baby Boomers really "investing" in property, or are they helping their children buy homes?"

(Is there a difference? They are investing for their own portfolios, or helping their children to invest. The result is the same: more money going into property from the "peak earnings" of boomers.)

That's what my Baby Boomer friends are doing here in the States. We're also "downsizing."

(Do you represent the majority? Or are you just a sort of HPC-fringe. Someone is buying all those new properties being built in the UK and the UK. Where do you think the money is coming from? Here in the Uk where they keep stats on such things, there has been a big slowdown in FTBers property purchases.)

I see a difference between investing in property for retirement income and giving money to your children so they can buy homes. (You'll never see that money come back to you. )

I'm just wondering if the housing bubble is being partly fueled by Baby Boomers helping their children get on the ladder.

The people I know who are downsizing are doing so for lifestyle reasons, not because they're worried about a house price crash. Their kids are out of the home, their pets have died, and they want to work less around the house and garden. So they sell their big home and move into a condo. The condo usually costs less than the home, but not always. This downsizing movement is what's fueling a lot of the condo building in U.S. cities. I think developers have overbuilt, however. Prices have started to fall.

I don't get the sense that a similar downsizing is happening in the U.K. Maybe that's because not all that many people in the U.K. live in huge, rambling homes.

[AgeingBabyBoomer]

"Yeah, yeah - I was wrong - there will be an extra 1.36 billion muslims by 2025. "

I find the tone of that comment offensive.

Are you saying that other religions have more right to reproduce,

you don't resent the extra Chinese or Indians, just the extra muslims?

Maybe you should fly out there with a catering pack of HPC condoms,

may work out to be a saving when you finally buy a house....

ABB