The growth of city populations around the world is becoming less important to real estate, because of technology and the ‘new economy’, according to a prominent economist.
Speaking about the economic backdrop for the real estate sector, Hans Timmer, chief economist for South Asia at the World Bank, told the ULI Europe 2020 conference in Amsterdam: “Ultimately the concentration of people in cities is not that important. Urbanisation is not that important – instead of location it is much more connectivity that will determine the future.”
He talked about the new economy of independent working and said that a World Bank study of Europeans up to the age of 24 showed 80% did not have standardised employment contracts.
“Sometimes they have two jobs, in many cases they work for themselves and when you interview them several of them are no longer talking about jobs – they are talking about activities,” he said.
“What is now true for the young people who see that all the regulations and the safety nets are no longer working for them, because they are in the new economy – that economy will stretch to a much larger part of society and will fundamentally change things that we have known for a long time.”
Speaking on a subsequent panel, Komal Sri-Kumar, president of macro-economic consulting firm Sri-Kumar Global Strategies, said real estate markets occupied by younger populations would also provide more promising opportunities for investors.
“The median age of the population matters,” he said, contrasting the average ages of India (28) and Brazil (31) with that of China (38) which was still feeling the effects of its one-child policy.
“You want young people for the real estate sector; old people – we don’t matter as much on the real estate side,” he said.
But Timmers said it was easy to overemphasise the importance of young populations. “There are actually many disadvantages of having a young population,” he said, adding that a large proportion of GDP was needed in youthful countries to improve education.
“If you look at individual productivity studies, then productivity peaks at around 45, and that’s more or less the average age in Europe. The problem in many countries like India is also that companies are too young, and you don’t have managers.”
Timmers also said it could be more useful to factor in longevity rather than just looking at average ages. On this basis, Europe was not so old. “They have a population that still has many years to live,” he said.
