Half of Syria and Afghanistan are moving to Europe. Is that a problem? Not if you own apartment buildings in Europe it isn’t! These new EU citizens will need a place to live. It seems safe to assume that they don’t have the capital necessary to buy a house. Thus this will put pressure on rents and enrich owners of residential multi-unit buildings. The pressure should continue for the next 20+ years as these immigrants have kids. The population of Syria, despite the challenges of living there, has risen from 12.5 million in 1990 to 22.85 million in 2013. The population of Afghanistan rose, over the same period, from 11 million to 30.55 million. Imagine the fertility when these folks can tap into European governments’ free housing, free health care, free food, and free education!
There are European REITs, of course, but a generic REIT or REIT index (example) doesn’t seem ideally positioned to respond to this new wave of migration. Will there be more office jobs? If not, owning an office building won’t be any more profitable than before. Will there be more cash in the retail economy? It seems unlikely, especially if taxes need to be raised in order to support the newcomers. So investors in shopping malls won’t get a boost. Thus it has to be a REIT specializing in housing and, ideally, huge charmless buildings (see this ft.com article for some ideas).
[Interestingly, when this is all over, and the owners of residential property are crazy rich due to government action (providing free housing to immigrants), guys like Thomas Piketty will be looking at the statistics and calling for additional government action to reduce wealth inequality.]
Related:
- “Small-Town Sweden Chafes at Migrant Influx” (Wall Street Journal, October 20, 2015) — the journalist notes that “the migration agency is desperate for rooms to lodge asylum seekers due to a housing shortage in Stockholm and other large cities.” Among the Swedes interviewed, the real estate developer who is going to profit by building “a shelter for asylum-seekers … from Syria, Eritrea, Afghanistan, and Somalia” was the most enthusiastic about the project and about immigrants: “This won’t increase social tensions unless those who already live there start them. I’m convinced these children and teenagers will behave. These aren’t people who’ve come here to start trouble, they’re fleeing wars.” (unclear from the article if the developer lives in the same town as the proposed shelter)
Word from Athens is that the government there will pay landlords to house the migrants but at below market rates. Landlords are also wondering who will cover any possible rental damages since these people are unemployed and would be difficult to recoup losses from them. Also, what happens to the owners if the people are housed but the govt runs out of money again? I dont think they’ll just be thrown out. Right now the lack of opportunities in Greece seems to be driving most migrants north. Government housing and food would increase the incentive of these folks to become wards of the greek state on a long term basis.
Europe faces a couple of demographic trends: lukewarm to negative population growth, migration from less prosperous countries (like Greece) towards more prosperous ones, and most importantly, migration within those countries from the countryside to the cities.
The effect of this is that there are dying villages even in prosperous countries. The north of Sweden is slowly depopulating itself. East Germany is home to many ghost towns notable for their picturesque traditional concrete high-density housing. If it’s your lifelong dream to live like a 13th century baron in France, it’s never been more affordable (peasants not included). Even a tiny, densely populated country like the Netherlands has villages that, like Detroit in the US, can no longer foot the bill for demolishing all their abandoned houses.
You’re calling the refugees new European citizens, but this is exactly what they will not, for the first decade or so, be. If European governments can be trusted to choose the path of least resistance, these people will be housed in undesirable, rural areas, where property is cheap and voter influence (thanks to proportional representation) is negligable. They will not have freedom of movement if they want to remain legal residents and (presumably) entitled to benefits.
In two decades, you might read an interesting story about “Syrian Villages” in Austria, but unless you can find a European REIT that advertises its heavy exposure to residential properties in areas with negative population growth, I don’t think your investment portfolio will have grown much. Right around the same time, their European-educated children will be entering the workforce, relieving the generation of our current crop of politicians, who will then be near retirement age.
Is there a European equivalent to Walmart/Target/Costco? All those apartments will need furnishings. (Unfortunately, it looks like Ikea isn’t publicly traded.)
Or municipal bonds? Unless they go bankrupt like some Californian cities.
“The continued arrival of large numbers of refugees in Germany could cost the country’s towns and communities up to €16 billion, far outstripping funds that have so far been allocated to deal with the crisis, a report suggested on Thursday.”
“Merkel had promised €670 per month per refugee to Germany’s 16 states.”
“[the general manager of cities association] added that costs of around €1,000 per month per refugee were more likely, demanding that states should add an extra €300 to the fees.”
http://www.thelocal.de/20151029/refugees-to-cost-up-to-16-billion-city-managers
Interesting to me how Angela Merkel is so willing to spend other people’s money on her Nobel Peace Prize project. Obama got it for free without doing anything.