End to Growth - Impact on Property

End to Growth - Impact on Property


This subject was touched upon on the QE thread, and I thought the subject was interesting enough to warrant a thread of its own. So here goes.


The essential problem is: we live in a world with limited resources, so how can Growth go on forever? Some would claim that growth can move away from a reliance on resources, and there is SOME truth to that. But we do know that rapid growth slows in most countries once average incomes hit $10,000, since that means the nature of growth and jobs moves into sectors where there is global competition. And mature economies like the US and Europe show slow growth, and a "triumph of socialism" which builds entitlements for people who may be disinclined to work, when social benefits alone may provide a similar standard of living to lower paying jobs.


Turning towards property, what might a global slowdown in growth, and even an END TO GROWTH do to property prices?

Growth in what?


The world's population is still growing, the supply of money is still growing and disposbale incomes are still increasing - for two out of three the rate of increase is slowing but a slower increase is still an increase. These factors are both favourable to property values (at least in nominal terms) as is the increase in the availibility of debt finance and improved property rights.


On the other hand, higher taxes and government policies (ranging from zoning laws to foreign ownership restrictions to rent controls) act as headwinds in many places but it's also worth remembering that very oftne headwinds push up prices (e.g. capital gains taxes tend to discourage people from selling leading to higher prices).


Of course, your milage will vary from country to country or even within a country.

A couple of excellent videos on this topic:


End of Growth? http://www.youtube.com/watch?v=V0grQGKaTYA (highly recommend the book!)


The Problem with Exponential Growth: http://www.youtube.com/watch?v=F-QA2rkpBSY

"Growth in what?"


That is an excellent question. Most will answer, saying : "Growth in GDP"


But hey, guess what, much of what has been called growth is "cannabalizing the voluntary unpaid economy". So if a mother starts working, and then she and her family have to pay for meals at restaurants, pay for child care, pay for taxes and other forms of transport: the GDP goes up, and the taxes paid by the family goes up. But are they really better off? Perhaps not.


If someone lived in a farming area, grew their own (healthy) food, and did most of their own work, living in a self-sustained way - and then they take a job and move to the suburbs, drive to work, and buy processed food - is this person better off?


Most of NEGATIVE GROWTH might simply mean a return to an "old fashioned" and more self-sustained way of living that could actually be healthier for the people and the planet.


Embrace it !

However.... I am not sure I would embrace it... because there is a slight problem with 'end of growth'


For thousands of years there was virtually no growth - economic or population - on the planet...


Growth (the cancer?) really only started with the harnessing of cheap fossil fuels and industrialization...


And with that came enormous growth.... to the point that we now have 7 billion people on the planet.



So if we are at or approaching the end of cheap fossil fuels - and as the Heinberg talk points out, we have no alternatives - then we still have 7 billion people who want jobs and food...


Fossil fuels are required in pesticides, fertilizers, transport of foods etc... so that would mean a problem feeding the planet...


Once again - the Heinberg video explains the end of cheap energy is already manifesting itself...


If he is correct - then the least of our worries would be the impact of 'end of growth' or even minimal growth... on the price of property

"Fossil fuels are required in pesticides, fertilizers, transport of foods etc... so that would mean a problem feeding the planet..."


I disagree. We WASTE enormous amounts of energy, especially in North America.


Here are some figures I like to quote:


+ USA uses 27 barrels of oil per capita per annum (actually, if may have fallen to 25 or 26, by now)


+ Europe uses 9 barrels of oil per capita per annum

+ China and India uses maybe 3 barrels of oil per capita


Curtailing the suburban living arrangement would bring a huge savings in oil usage. And wise Americans are already waking up to the inevitable.


Homes in walkable communities have held value far better than in suburban areas requiring long commutes.


I used to say: "Hit them with a brick" to wake up those hooked on Happy motoring, but they are waking up on their own, especially young Americans, and turning their backs on the wastefulness of suburban life. (I grew up in a Detroit suburb, and detest that way of life. It ruined the city of my birth.)

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How much do Americans drive?:

http://www.bts.gov/programs/national_household_travel_survey/daily_travel.html

Young Americans turn away from driving


Young Americans are eschewing cars for alternative transport, leaving carmakers to wonder if this is a recession-induced trend or a permanent shift in habits.

For generations of American teenagers, the car was the paramount symbol of independence. But in the age of Facebook and iPhones, young adults are getting fewer drivers’ licences, driving less frequently and moving to cities where cars are more luxury than necessity.


Figures from the Federal Highway Administration show the share of 14 to 34-year-olds without a driver’s licence rose to 26 per cent in 2010, from 21 per cent a decade earlier, according to a study by the Frontier Group and the US PIRG Education Fund released this month. (Some US states allow 14-year-olds to get a learner’s permit to drive.) Another study from the University of Michigan showed that people under 30 accounted for 22 per cent of all licensed drivers, down from a third in 1983, with the steepest declines among teenagers.

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/more: http://www.ft.com/intl/cms/s/0/78420798-895c-11e1-bed0-00144feab49a.html#axzz2DPyg7k2z