Demographic change, global warming, and carbon dioxide emissions were topics that took center stage during the opening debate of the Urban Land Institute’s recent 16th European conference in Paris, which explored the conference’s key theme, “the only problems left are the big ones.”
In addition to holding a debate on the effectiveness of regulation and the ongoing European crisis, the three speakers presented conference delegates with a new roster of equally relevant business concerns, urging them to explore the role that the property industry can play in managing social and environmental change, as well as benefiting from it.
“Demographics [are] the single most important factor nobody pays attention to, and when they do pay attention, they miss the point,” said Amlan Roy, managing director and head of global demographics and pensions research at Credit Suisse, quoting social ecologist Peter Drucker.
Panelist Roy argued that getting to grips with how demographics differ between countries, as well as how understanding how demographics shape the behavior of workers and consumers, was crucial in determining demand patterns for real estate in the future.
“No one can identify what we will need in the next 20 years to support aging populations. Fertility rates are going down among young people in emerging markets, while life expectancy is going up,” he explained.
“One of the single biggest factors that contributed to U.S.A. house price [rises] was population growth. Nevada had the highest net population inflow; no one expected that to be the case,” he said. “Germany is one country that has suffered from the impact of aging on house prices,” he added, alluding to data that show that countries with aging populations such as Germany and Japan have experienced residential property price declines.
German scientist, former politician, and professor Ernst Ulrich Von Weizäcker reminded conference attendees that rising sea levels could seriously affect Florida, Bangladesh, and growth zones in Asia that lie along the coast, and that global warming is a “fact of life” that would have an impact on real estate.
“Fifty thousand acres [have] been developed in the six years of low interest rates and cheap oil. . . . Energy demand is the result of not thinking and not engineering,” he said, calling for a change in construction methods and transport to increase energy efficiency. “We can become more prosperous if we change our habits,” he added.
But short-term concerns focused on southern Europe’s debt issues, and Andrea Boltho, emeritus fellow of the University of Oxford and director of Oxford Economics, said the impact of a southern European country leaving the European Union could make the recession “tremendously worse and last for well over a year.”
He added that insufficient action by the European Central Bank, failure to roll over maturing debt, and a run on the banks were possible scenarios that would cause a breakdown of the Eurozone.
When asked what impact taxing financial transactions and regulation was having on industry in general, Boltho said higher taxes on energy and the financial services industry would be good from an economic perspective.
“The financial services can be useful, but they overdid it. A Tobin tax [excise tax on all cross-border currency transactions] seems indispensable. I am in favor of it and if it raises too much revenue, then government can reduce VAT [value-added tax].”
While Roy argued that regulation was a good thing in principle, he urged regulators to engage in public/private initiatives to fully understand complicated financial instruments and the consequences their policies would have.
“We have the U.S. with one set of regulations, Europe with another. We need taxes on energy and financial services, but policies need to be equitable and well thought out. I don’t think regulators have done that so far.”