The Layout For The Globalization Of Real Estate

in LeoFinance2 months ago

We are in the last bull market for residential real estate. Yes, you read that correctly. When the bull market finally does end, whenever that is, it is over. We are then in a new era which will carry us forward.

This is a bold statement to make but it is all in keeping with what will emerge over the next 20 years: The Globalization of Real Estate.

Just like we saw the globalization of manufacturing flood the world with cheap products, the Globalization of Real Estate will follow a similar path.

This will unfold is in three phases. We will cover them in this article. The reason this is happening is technology changes everything. Now it is time for real estate experience what other industries went through.

For the sake of brevity, commercial real estate is outside the scope of this article. That said, many of the factors do come into play with that.

Before getting into how this is going to occur, we need to take a look at residential real estate to size it up the areas of vulnerability,

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The Present State Of Residential Real Estate

  • The popping of the Artificial Urban Real Estate Bubble

We have not see a true market for residential real estate in 70 years. The market was completely skewed due to non-market forces. What resulted was a monopoly that gave huge advantages to urban areas from a real estate perspective.

Have you ever considered why most of the population of developed countries lives within a 70 mile radius of a city? Is it because people prefer to live on top of each other like sardines? Do they prefer traffic? Noise? Pollution? High cost of living?

The answer is no. So then why do people do it?

Here is where the skewing of the market comes in. We saw the migration for rural to urban areas start 70 years ago. It really accelerated 30 years ago when the globalization of manufacturing (along with automation) took place. Suddenly, urban areas had a monopoly on the high paying jobs. This is what forced people to move to the cities.

Those days are going to be coming to an end. In fact, we will see this in phase 1.

  • Residential construction has not progressed in 100 years

We basically still build houses the same way we did 100 years ago. Other than doing the trusses off-site and using a crane to put them up, things are almost exactly the same. Sure we have compressors, nail guns and cement mixers. However, when you think about the building of a house, very little is different.

A lot is cleared and a foundation laid. The framing is done and then it is closed in. Adding in the trusses allows the roof to be put on. Inside, the electrical and plumbing is run, followed by the sheetrock going up. Add in flooring, appliances, tubs/toilets, and the bulk of the work is done.

And most of that work is still manual.

The Obliteration

Technology is going to upend both of these factors. We seeing how this will unfold.

  • Remote Work

Over the last few months, we covered the concept of remote work. This is not a passing fad. It is the "new normal". This is in keeping with technological advancement and in alignment with the younger generation of workers. The idea of returning to the office like before is not going to happen.

The technology was in place when the lockdowns hit last year. This allowed a rapid conversion to remote work. With people in this state for so long, they got accustomed to it. Zoom™ calls are now normal for most people. How many even know what a video call was before 2020, let alone how to make one?

We are also seeing more tools being planned by the likes of Facebook, Microsoft, Salesforce, and the cloud companies. They are going to give both workers and management more to work with.

What this means is that one does not have to be within driving distance of an office. Eventually, the idea of being able to work anywhere with just an Internet connection will become the norm. Think about it this way: if one sits in an office all day looking at a screen that is tied to the cloud, that can be done anywhere. That is a significant part of the workforce.

  • By the middle of the next decade, we are going to see the cost of home construction drop by 70%-90%. This is another bold statement but it is in keep with Informational Technology.

The construction industry is going to be invaded by technology. We covered the proof-of-concept that is taking place using 3-D Printing. A number of articles were written detailing the progress of this technology in the housing market.

This is not the only game in town. We also have artificial intelligence, robotics, and the materials sciences which are working on solutions. This industry has not changed a great deal in over 100 years. That means it is primed for disruption. Any industry that has as much money tied to it is going to appeal to those who can radically alter it through technology.

We also have the space race on. While that would not appear to have anything to do with housing, the fact is we are seeing a lot of money going into research & development. One aspect of this endeavor is the approach of how to build in space. Often we find that space related developments have uses here on Earth.

While we are not exactly sure what technologies will become the norm, it is safe to say that advancement will be made to completely upend residential construction over the next decade and a half. If any of it follows the Information Technology trends, that will result in the cost reductions mentioned.

The Phases To Globalization Of Real Estate

Here is where we will cover the way this will unfold.

  • Phase 1

This already started. Last year, we saw many people move from the cities to the suburbs. At the same time, there were people who were an hour outside the city who relocated to 3 hours away. Why did they do this? To lower their costs primarily.

It was a move that was made possible by the shift to remote work. While not fully adopted, visits to the office were reduced to once or twice a month. This means that day, when 3 hours from the office, is pure hell. It is worth it, however, if the cost of living drops 25%.

Since it will take a few years for the remote work idea to fully sink in to the consciousness of both employers and the workforce, expect this phase to last until the middle of the decade.

  • Phase 2

Here we see people starting to move to cheaper areas. This happens when visiting the office is, at most, once or twice a year. At that point, one can hop on a plane when required.

Instead of assembling around the same cities, people are going to reverse the migration of the last 70 years. We are going to see a move from urban (or suburban) to rural areas. In the United States, people will go from the Seattle area to Eastern Washington State. Areas like Western PA and VA, Georgia, and Tennessee will be destinations.

The key will be the cost of living along with quality of life. As work allows for greater freedom, in terms of physical location, we are going to find millions seriously reducing their expenses.

We can expect this to start mid-decade.

  • Phase 3

This is where we see the most change. It will take time for a couple of different reasons. To start, people are going to have to alter their outlooks dramatically. Also, countries will have to gear up for it. Thus, the quicker that leaders see what is taking place, perhaps they can jump to the head of the class and beat the others.

It is here where someone like the President of El Salvador could utilize those Bitcoin profits for infrastructure. The money can be used to build roads and hospitals. Also, it might be a good idea to stop waging war with the neighbors and making the place highly appealing.

Why go through this? Simply to attract 250K Americans making $65,000 a year. Since the cost of living will be a fraction of what it is in the States, the country can attract a plethora of fair high income earners.

Again, remote work allows people to work from anywhere. The number of digital nomads is going to keep growing. Ultimately, anyone who spends their day looking at a screen will be eligible for this.

Will everyone seek out this option? Of course not. However, a country like El Salvador only needs to attract 250K people earning this type of money to radically change its economic situation.

This is going to not start, on a large scale until the 2030s.

High Prices Areas Hit The Hardest

We know the supply/demand equation is going to affect things differently. Certainly, as more people move into an area, prices will start to go up. However, the price increase will not offset the decreases seen from the high cost areas with the exodus.

This might seem impossible to many people. The reason for this is we tend to fall into Paradigm Paralysis. This is where we know something so well that we find it impossible to believe that anything could radically change it. After all, we did it this way for 100 years.

In this article we covered a few of the technological trends that are in motion. There was a time where families were all located within 100 miles of each other. A few decades back, children started to go away to school and not return home. They migrated to where the jobs were, leaving behind parents and other family members. Therefore, shift like this can happen on a grand scale.

As countries like El Salvador, Ecuador, Mexico, and those in Southeast Asia start to realize what is taking place, they will be able to flood the world with cheap real estate. This is going to change the entire dynamic.

This is the last bull market in real estate simply because the bear, whenever it starts, will align with technological progress. Bear markets in real estate tend to last 6-9 years. If it starts in the next year or two, we will see that carry us near 2030. By the end of this decade, some of the technologies mentioned will be far more advanced than they are today. This means there is a greater likelihood all of this takes place.

One final point: Many of the countries with high real estate costs also have major demographics issues. So watch Germany, Italy, Spain, Japan, Canada, and South Korea. They are going to have to navigate through those issues over the next few decades in addition to everything else mentioned here.

What are your thoughts on this? Let us know in the comments below.


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I wouldn't mind cheaper real estate but I think the rest of the world will probably get it first compared to California. I wouldn't be surprised if they started adding taxes for each piece of a building added (hinting towards a mileage tax that I heard started being implemented in San Diego).

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They already add taxes in California for every piece added (if it is an addition to the house)...though if you're talking about anything, like even a light fixture...well...they already tax you via the sales tax...California will tax people to breathe if they can figure it out...oh yeah, the carbon tax...never mind.


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Yea the taxes are crazy in California and it seems to be the testing ground before they try to spread it to the rest of the country.

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Personally I don't think so - each state does have autonomy and states like North Dakota for example with their own central bank and lack of state debt are going to have a lot of benefits over states like California where average quality of life is decreasing - while cost of living and taxes are increasing... Whereas the inverse is true in North Dakota

California and a few of the blue states have been the testing ground for certain policies. After they get it working there, the politicians try to expand it over to other states and I don't really think its a good thing. I don't know too much about states outside of California but I tend to see things move over in the articles I read.

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I've said this before and I'll say it again. This would hurt my net worth considerably if it happens but I would welcome a complete collapse of the real estate market because it would be so beneficial to young people trying to make a life for themselves. There's no logical reason for real estate to be so expensive, even in the most sought after places in North America or other first world countries. 75 years ago the cost of housing was cheap, and it became that way due to technology. I always think about that Chuck Berry song You Never Can Tell. He talks about a young couple who get married and the man takes a job. Then they buy a car and get an apartment, put some appliances and furniture in it and have a great life together. In the song it's all possible for an average married couple, and there's no mention of struggle to pay for it, and they don't sound like they have advanced degrees or come from rich families either. Most people had very little education and training back then, but they were able to do okay anyway.
On both sides of my family, my grandparents, who lived through this era as young people, started their own businesses and did quite well for themselves. They weren't rich by any stretch of the imagination, but they weren't struggling either. This is not the scenario that played out for their children, and it got even harder for my generation, their grandchildren. It's even harder now for young people than it was for us. This is due to massive market distortions inflicted by the government in my opinion. People think this is just how things go because this is the only thing most people alive have experienced, but they don't understand that what's happening with information technology now used to happen with things like housing, medical care and education before the government got involved. Living should be cheaper than ever and it's not, and it's because society decided to use coercive force to "fix" it. Hopefully we get back to a place where technological advances make it cheap to live again soon and my own kids and their peers can benefit from it.

Hopefully we get back to a place where technological advances make it cheap to live again soon and my own kids and their peers can benefit from it.

Any industry that technology enters are the base level will find itself having its costs reduced tremendously. The challenge is that housing, healthcare, and upper level education are all done just like they were 100 years ago (at their core). The healthcare system is still a break/fix model.

As for government intervention, you are correct in the market distortion. When governments guarantee things like loans, then predatory lending practices with no standards can occur. It creates a massive distortion of the market.

Of course, the areas mentioned are also going to be obliterated by technology over the next 20 years.

This wave is starting to accelerate. We have not see anything this powerful, from a societal perspective, in our history. This is order of magnitudes higher in its impact than the last Industrial Revolution. The difference is, this time, we can see things happening everywhere.

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I disagree with what you've written for this point-the cost of housing hasn't gone up if you take into consideration the payments people make in line with inflation. Cost of living has increased because...well...we have so many more conveniences we all think we need:
1 Television
2 Computers
3 Cell Phone
4 Internet
5 Air Conditioning
6 Hot water

There are many conveniences that aren't required to live, but have become so commonplace that we all spend our money paying for them. If someone were to cut out all of the above from their list, they'd save several thousands of dollars a year. That extra money put toward a house payment would pay it off in half the time if not 1/3 of the time...making it affordable...I'd rather have the conveniences :)


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Everything you've mentioned has come down in price in real dollar terms due to technological advances. Even with the added conveniences, housing should cost considerably less than it does due to the same technological advances. My old house in San Diego county, no property improvements on what should be a depreciating asset, the lot has been cut in half during this time too, but it has quadrupled in price from about $200k to $800k in the last 20 years. There is no reason for something like that to happen other than market distortions from things like currency devaluation, government subsidies and zoning regulations.
Similar story with my current house in Raleigh, NC. House is beginning to fall to pieces and needs major renovations. Again, no improvements to the property in the past 30 years since it was new, yet it has tripled in price. This has nothing to do with adding conveniences.

Price has gone up, yes, but the cost has not if you compare price inflation and wage inflation. I have a video on my YouTube channel that shows the research...I'll have to find the link for you.

Funny enough, if you go back 30 years, take a 0 off the end of the price. Another 30 years before that, take another 0 off and so on...
In the early 90's in S. California, my current house would have sold for about $50K but is worth about $500K today. In the 1960's it would be about 5K. 1930's, about $500...and so on. It's not exact, of course, but it has rung true in many of the cases I've researched. Prices go up, but affordability goes with it because of wage inflation...

I dug up the link...


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Wages haven't gone up 10x since the early '90s.

No, but wages have gone up in a ratio fast enough to maintain a payment on a loan for a house that has gone up 10x.

This still supports my original assertion that it's an artificially high price though. This is due to artificially suppressed interest rates to ensure price inflation, which is part of the conflict of interest the government has holding a monopoly over currency. They do this because it devalues the dollars that they owe money in. As these prices climb, their revenues go up in nominal terms, but their debt obligations stay the same in those terms. Eventually even the low interest rates will run out of steam and people won't be able to make the payments on the huge loans. It will inevitably end catastrophically at some point. You can't run a pyramid scheme forever.

You are right...especially if the interest tied to the underlying debt is adjustable... Great convo!

This is factually inaccurate if you look at the average statistics... You may be referring to the statistics of the Top 10% or above who have experienced both the highest % wage increases, capital appreciation through real estate and equity appreciation through the stock market and unfortunately it has been all at the detriment of the people on the lowest rung of the economic ladder...

The world is changing and technology will change alot. Real estate has been very lucrative for a long time and the all facts mentioned here is true we might bear market but I don't cost of construction dropping over 90%

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I think that is a pretty reasonable assertion that you are making. Given the length between bull markets there are definitely going to be some huge changes by the end of this one. With people shifting to more remote areas, it is going to be important to keep an eye on utilities and infrastructure. Likely those sectors will see an increase due to building out to the more remote areas.

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That is very true. Those areas are going to need to do some infrastructure upgrades, whether they are in developed countries or not.

Plus, think about what this does to the tax base in many areas. Couple this with demographic issues in many developed nations and we see some major changes that will be taking place.

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Very true. I noticed you had a post this weekend about taxes, but I didn't get a chance to take a look at it.

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Technology into real estate, boss seriously I can't wait for this.

This thesis makes tons of sense, I definitely agree with the phase one as I see it in my real estate investing. And 3D homes is something we are watching too. And borderless is a coming push as I even ponder whether I will stay in the states my entire life.

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And borderless is a coming push as I even ponder whether I will stay in the states my entire life.

I would say depends upon what some of the other countries around the world do. If we truly see a "competitive" situation arise, then we have to really consider the areas that are much lower cost.

The number of people who are eligible to be digital nomads is growing. Think of how this will all look if there are 2 billion people involved in cryptocurrency. The numbers will be a ton of people will be benefitting from huge network effects, making them all eligible to move.

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A societal tidal wave of a shift is coming over the next few decades

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We're in the First and Second phase of globalization of real estate in Nigeria. Many are already subscribing to remote working and housing rental cost in the city is gradually losing value. Very apt communication here.

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Thanks for the feedback @uyobong. Glad to see it is already happening in some areas of the world. It will take some time to filter throughout, especially since it needs to penetrate people's psyche.

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Great read. Agree totally. I just need to witness it happening... Haven't bought a house yet... they are freaking expensive and not worth it.

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Real estate investing is my jam. I'm not sure about your timeline, but you definitely have some things right. The migration from the large cities to the suburbs and rural areas was jumpstarted due to the issues related to covid. There will definitely be some places that will keep their thick/overpopulation, like southern California where the weather is practically perfect. Remote work will be interesting...if it prevails, offshoring work that is now remote that wasn't thought to be remote until the last 18 months may take a lot of jobs away from the highly paid workers in the high cost of living areas causing the areas to become depressed...much like a return to $0 minimum wage would cause a dramatic drop in prices. Anyway, all of this is brand new and it will be interesting to navigate these waters. Great thoughts!


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