I've been looking a lot lately at demographic stats in an effort to understand future trends. I take issue when people tell me that because real estate has "doubled every ten years" over the past while in Victoria, that it will continue to do so in the future. I ask these people why? They say, because it has. I say, you need to understand why it has in the past in order to predict what it will do in the future.
Apparently I'm not the only one subscribing to the theory that the past 30 years have been an anomoly in real estate valuation cycles. Two academics in California published a paper early this year that made some news, and created some waves.
78 million Boomers are about to enter the years when people tend to become sellers rather than buyers. And as a result, they expect "many more homes (will be) available for sale than there are buyers for them."This theory is known as an age wave in economic circles. We can't argue that this won't happen. What is up for discussion is how it will impact local real estate price trends and whether or not current immigration/migration rates will replace the demand the boomers represent and the supply boomers will create.
"The Baby Boom generation was born over a period of 18 years, and once its sell-off commences, it could dominate the housing market for up to two decades," they say.
My own thoughts, at least at this point, are they won't. I don't see a bright, expansionary future for real estate here in Victoria. I see a return to the pre-1970s eras of logical, sustainable, inflation-equaling growth (albeit cyclical); but only after we see a correction that will at least equal the one--as far as total percentage (maybe not rate of decent)--of 1982.
To me, my house, when I buy it will be a hedge against inflation, not a retirement plan in and of itself. Which is all a house should be. If you want to get rich in real estate under those conditions, you'll have to return to cash flow positive real estate investing, which means having a downpayment and a rent that exceeds your carrying costs by at least 10%.
What do you think?