Summer season is upon us, and thus many newspapers are bound to fill their weekend pages with all books any white-collar employee in the Anglo-Saxon hemisphere is due to read over their annual leave. An absolute blockbuster on those lists ever since its first publication in 2005 is “Freakonomics” which explores the unlikely linking between two economic indicators, such as abortion legislation in the US leading to a fall in crime rates, or the power structure of meth dealers as the best possible job option in Chicago.
Based on that theory, it is possible to look at the changing demographics in the developed economies of western Europe today and combine those statistics with global warming data, a job market faced with automation and the spending habits of millennials to inevitably arrive at a real estate market ready for the crash of a lifetime.
Allow me to explain.
Firstly, it is clear that immigration into Europe in recent years will lead to a changing workforce, which will present itself to employers in a few years. Whether one likes to admit the following or not, European employers tend to offer white-collar positions to those employees sharing their values, norms, and name structure, and thus we are bound to be left with (1) and older workforce working longer and (2) an ever greater unemployed and frustrated younger workforce of immigrant origin which will live at home with mommy and daddy for a longer period.
Secondly, existing European housing in the developed economies is not able to withstand the coming extreme temperatures which, for example, northern Italy saw last summer with the passing of heatwave ‘Lucifer’ and southern France saw a few weeks ago when snow fell half of May.
Those houses will need ever more repairs until they reach a point where the value of all real estate built before, for example, 1950, will either drop below a certain price point or need to get government subsidies for repairs (which would then lead to higher taxes on the population).
Thirdly, the automation of the job market will, and this point most economists agree one, kill off some 30-40% of all existing jobs within the next twenty to thirty years, leaving many families unable to buy a house of their own and putting a further strain on existing government spending.
Lastly, the spending habit of millennials is such that they splurge and lend monies to purchase material goods instantly, leaving them to worry about it later. Case in point is the Chinese economy where a first non-saving generation of workers worries Beijing authorities, to the point where the IMF warned them that the current debt levels of Chinese households were growing to dangerous levels.
With all this, in my humble opinion, a perfect storm seems to be brewing on the horizon, leading this thinker to forecast a European real estate crash like never before.