A few days ago, I had the privilege of attending to a Real Estate congress in Seville organized by Noteges Consulting, where real estate professionals met from every corner of Spain, and general interesting topics were dealed, especially for us that developed this wonderful profession.
There was a speech focused on Demographics, by Alejandro Macarron, who is currently the highest authority for this matter in Spain, and author of the famous book “Demographic Suicide in the West and half the world: Either more births or catastrophe?” -which I highly recommend to read- because it gives data and arguments that for sure will provoke at least an alert reaction after reading it.
And it is well known for everyone that every year children are born less and less, and the low natality in every western countries- this is not only a Spanish problem- it is a dangerous phenomena, because this process is leading us to the extintion of humanity.
As we can see in the canvas above, the dicrease in terms of populational growth in Spain, only it is absorbed thanks to the different migrant flows that are generating. Without going further, according to the INE in the last semester of 2017 the populational increase was the result of a vegetative balance of 31.905 people (186.786 newborns, against 218.688 deaths), which was compensated with a positive migration flow of 53.926 people (there was 237.115 immigrants coming from foreign countries and 184.189 emigrants with a foreign destination).
This is a well known fact and it is not a apocalyptical prophecy nor a warning. Here we have the data by INE, and they are basic maths: if less and less babies were born, and the hope of life is higher and higher, this means that we have an older population, with the consequences that generates for the economy, and thus for the Real Estate industry. And this is where I would like to put the focus, in this very direct effect that this phenomenon has on the house demand.
It is studied, that demographics have devastating effects in our industry, indeed that was the main cause that provoke the Real Estate bubble before the crisis of the previous cycle, which was in year 2007 -11 years ago- independently that it seems like it was yesterday.
The Advance Research Center of BBVA already predicted in year 2002 what was coming for us, which is also happening right now, the majority of people were ignoring that warning. And based on this study, it was already indicated what would break the bubble and provoke the crisis in this sector and thus in the whole economy -because this industry always has worked as an amplifier of that- it would because of this demographic effect.
As we can see in the picture above, in Spain more than 14 million of Spaniards were born in the 60´s, that was called the Baby Boom generation. When they were between 25 and 30 years old, they were looking to buy their first house; which already provoked a first Real Estate bubble in the 90´s.
The same generation, once they have already paid in the majority of cases their first house in year 2000, they were looking to buy their second house either on the beach, in the country side or in any other place, but different from the first one. That added to the Europeans (mainly British and Germans) of the same generation that were in their 60´s, and were attracted by the climate, our gastronomy and cheaper prices of Spain, they bought over 100.000 houses along these years.
However, the situation in Spain nowadays is completely different, and knowing that those Baby Boomers already bought and they are between 70 and 80 years old; and since 1980 we have the lowest natality rate of Europe and the youngsters are in emancipation (between 30 and 40 years old) is too small -and it is expected that it continues being like this for the next decades- and they rarely demand houses; because mainly they rent and they are going to inherit their parents house -due to they are single child- the real house demand in present for our country, is motivated by the following:
- Divorces or legal separations.
- Labour movements.
- Inheritance.
And because of this phenomenon, we add the huge stock of houses that were abandoned after the crisis, it makes that there are still more offers than houses demand, with the consequence effect in the property prices in our country.
Then, against this dangerous situation, we only can ask ourselves the question that fortunately I had the chance of asking Alejandro Macarron during his speech:
Me -Has it been calculated the number of children that is born in any family for balancing the current demographic situation in Spain?
A.M. -Yes, and I have to say that it is not that complicated to change this situation. With the simple fact that instead of having that average rate of 1,1 child per family -which is the current natality rate in Spain since the 80´s- if we would increase up to 2 children per family, this issue would be fixed.
So, after saying that, and without willingness to organize the family structure of any couple or marriage, not generating a debate about family, religion or any other controversial topic -nothing farther than the purpose of this article- we only have the option of looking for solutions that leaves us adapted to this new situation, like supporting youngsters to buy the property or any other that facilitate the development of this sector as essential for our economy.
