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In the July 2008 Issue of Property Investor News
Depopulating Europe
Over the last decade, many countries in the Central and Eastern Europe (CEE) region have been experiencing significant increases in house prices. Indeed, in many respects the period from 1997 to the first half of 2007 can be described as the 'golden years' for residential real estate investment in CEE. But this boom in prices has raised concerns about possible risks of overvaluation, especially as during that 10 year period, millions of young workers have moved to Western Europe for higher paid employment, and that even without that mass emigration, the populations in most of these countries is drastically falling because of low birth rates. Understanding the fundamental drivers behind the CEE regional real estate market has therefore become a priority, especially now that the 'gold rush' has passed.
Why Demographics matter.
Demographics are the foundation of real estate decision making. Current population and income characteristics - and the direction of future trends - determine whether demand will exist for new housing or retail space, and household mobility suggests where that new space should be built. Growth in the labour force, as well as its composition (age, education, skills, and mobility), strongly influences the success of office and industrial properties. And increasing household affluence and business growth create demand for hotels, second homes, timeshares, and resort or conference properties. Nearly everyone who will be making decisions about where to live, work, shop, and play over the next 20 years is alive now. We know a great deal about where they reside, their educational backgrounds, their family composition, their incomes, whether or not they work, where they prefer to travel, and so on. Consequently, we can anticipate future real estate needs, and the implications of demographic trends around Europe are enormous.
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