Was thinking tonight about how real estate has continued to become more and more expensive, (i.e. a good investment) over the past 70 years. However that price run up has been predicated both on the largest population explosion in human history, as well as artificial construction of supply, by NIMBYs and zoning laws in many parts of the world.
I’ve always assumed that, aside from occasional collapses, real estate will continue to drift upwards, perhaps not a great investment compared to other assets, but better than inflation.
The possibility exists of long term reversal of both of these supporting trends. Zoning laws are becoming threatened due to political backlash from how unaffordable housing has become. At the same time life in general has become so unaffordable that fertility rates are now strongly below replacement values in most of the developed world.
Can’t say anything with any certainty of course, but I think a future of continued growth of housing prices for the next century isn’t a guarantee. Sounds obvious when I write it out, but psychologically I had a deep seated assumption that the housing market was a guaranteed success long term. Think that may require a rethink.
If population trends down in the developed world, that’s a possible future to consider when choosing investments. Fewer people could depress real prices of stocks in general. Kind of difficult to know what types of companies would perform well in this scenario. I suppose technology companies specializing in automation (AI and robotics) is the only market I can think of that would do well. Commodities, construction, non-durables, energy, all of those seem to be at risk from a general long-term decline in population and therefore in aggregate demand.
Again not saying this will happen, but personally I feel as though I had not given enough thought to this.
Submitted October 10, 2021 at 04:03AM by ButtBlock https://ift.tt/3lrWijL
