A Risk Factor That No One Considers

Population Decrease.

As of now all throughout the Western World and Oriental Asia there is a population decrease.  Women are having less children.  This is something that no one is considering when investing.  Even some small colleges are starting to close due to lack of enrollment.  Which is because there are just fewer students.  In my hometown, which is an upper middle class suburb, two elementary schools just closed.  Because there’s a lower number of students coming in and the city can’t afford to run the schools due to a shrinking tax base. 

It has become true that the more educated a woman is, the less children she has or she puts off having children until later in her life.  Less people are getting married and many people are just choosing not to have kids.  I can think of very few people I personally know born after 1980 that have 3+ children.

Let’s look at the US birth rate as of 2019 – 1.8 births per woman.

In order for the population to increase the country must have 2.1 births per woman.

England birth rate, same, 1.8

China – 1.6

Japan – 1.4

Germany – 1.5

The only countries with replacement level birth rates are Muslim countries and/or African countries. 

Somalia – 6.2

Afghanistan – 4.4

All western and or developed/developing nations have a non replacement birth rate.

So, what does this mean for investors?

If you are investing heavily in long term real estate you have to take this into consideration.  If you’re investing in student housing especially.  Cities, and suburbs are shrinking.  Detroit lost over 1 Million people from its peak in the 50s-60s.  However, what many people don’t know is that Chicago lost 1 Million people from its peak too. Yes, even global world class cities are losing population. You have to be aware of this when acquiring real estate.

 I’ve looked at the demographic statistics around many metro areas and have noticed since the 1960s the population of these cities started to drop.  I then looked at the suburbs and thought maybe people were just leaving for the suburbs, and some were.  But even the suburbs have been shrinking in population.   People aren’t having kids.  Will there be people to rent those houses from you? You might not see a change any time soon, but in 20-30 years you may start to see more vacancies, and more schools closing.  This could greatly affect a long term real estate strategy.   The decrease has been slowed a little by immigration, which some may be against.  It may be difficult to rent to a tenant that doesn’t speak the same language as you or doesn’t come from a country with the same property rights as your country. 

Ask a seasoned real estate investor about the population decrease I’m pretty sure he has never thought of this rick factor.  As for now I’m not going to be buying any more rentals and just staying focused on running the 16 units that I do have as efficiently as possible. 

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