DJ:
>>I just keep the fingers crossed that the angels of real estate bubble will visit Munich some time in next 10 years.<<
You don't have to rely on the angels for this. It is relatively easy to project what residential real estate prices will do in Munich over the next ten years. However, it requires some homework.
The most important piece of information is a breakdown of the German population by age. It is a very odd thing that populations do indeed show distinct generations - i.e. peaks of population distributed around certain ages. I for one would have expected population distribution in the age range of relatively low mortality to be fairly uniform, but it is not. Now, the key ages for house buying are mid-20s and mid-40s, the former for first houses, the latter for trade-ups. We're talking probability functions here, so don't get too hung up on exactly how this works. If you do this for the German population and you find a population peak centered around, say, age 38, you are in luck. This wave is getting closer to the beach and will float all boats as it arrives. If you find a population trough centered around age 38, you are SOL and had better count on $8,000 gold (hohoho) to retire. My guess is that if you do this demographic research you will not be too happy. Germany and Japan in particular do not have a Baby Boom Generation, for fairly obvious reasons. Japan's demographics are more or less the inverse of the US and the UK's, with peaks in US population corresponding with troughs in Japan's population. What you may find is that your real estate boom will arrive between 2010 and 2020.
That's the demand side. The second and less important factor is the supply side. This boils down to how restrictive are government policies affecting residential development. In the UK, for example, it is bedrock government policy to prevent greenfield development and so the UK's growing population is jammed cheek-by-jowl into huge, dense cities, with an increasingly inadequate level of housing stock. This explains the UK's current soaring house prices, when taken together with the UK Boomer generation wave. The possible good news for the UK is that the artificially constrained supply of housing may mean a smaller fall in housing prices post-2009. |
