Global Warming and Housing
Throughout history, there have been mass migrations from one region to another. In some cases, like the Irish potato famine, it was because of food shortages. In other instances, for example World War I, it was because of war and persecution.
The reasons people move from one region to another are complex but can usually be linked to problems in their home region. Today, global warming is creating another problem in many regions which may eventually cause another mass migration. This article explores the current impact of global warming and how it may affect housing markets in the future.
The impact of global warming
If you live in an area close to the extremes of the planet, you may not have experienced the major effects of global warming first hand. The further you are from the equator, the milder the summers and harsher the winters. These places tend to have lower population densities.
In many South Asian and Latin American countries, the population density is much higher. The larger population, shaky economies, poor infrastructure, and rising temperatures are turning cities into ovens. The heat index, a measure of average temperatures and relative humidity, in places like Sao Palo, Singapore, and Delhi routinely passes 40 degrees Celsius during the hotter months. These temperatures increase mortality rates while reducing the quality of life.
On average, cities in South Asia experience a temperature increase of roughly 0.6 degrees Celsius per decade. This may seem small, but it can have disastrous effects over the course of 50 – 100 years. In the 13th – 17th century, Europe suffered from what is known as The Little Ice Age. Temperatures fell 1-2 degrees Celsius which caused longer winters and shorter summers. Crops failed, famine crippled many areas, and civilizations perished.
The same process is playing out in reverse within the regions hit hardest by global warming. If the temperature continues to rise at its current pace, one-fifth of the world’s population is at risk of being displaced. Within 100 years, large portions of South Asia will have summer temperatures that would be too intense for humans to survive in without protection. This means over a billion people will have their lives uprooted by climate change.
Repercussions for the housing market
There are roughly 258 million people currently living outside their country of birth. In a future where climate change forces a mass exodus of poor populations to cooler regions, over a billion people will be on the lookout for a new home. Let’s put aside the effects that kind of movement will have on infrastructure, food supplies, security, and other things. Instead, we’ll zero in on the housing market to understand how it’ll be impacted.
The first major wave of migrants will make their way overland to Central Asia and European countries and a smaller number will cross the Pacific Ocean. Historically, Turkey and other European nations have taken in the largest number of migrants but in a situation like this, all accessible countries will be affected. A housing crunch will develop and governments will scramble to create cheap mass housing. Their efforts will fall short and there will be an explosion in the cost of property.
Once these areas are saturated, the flow of humanity will continue across the Atlantic Ocean to Canada and the United States. Major cities such as Boston, Toronto, and Montreal will bear the brunt of the crisis. The government will do its best to build more housing but demand will quickly outstrip supply.
Inner-city housing in Toronto and other major metropolitan areas will be at 100% capacity. Since land and housing are limited, prices will skyrocket for both buyers and renters. Slowly, people will move out of the cities to look elsewhere for housing. This may cause a ripple effect in which all of the homes and land in the surrounding regions also jump in price. Almost all property will become extremely expensive.
What can we do?
It may seem like something out of a science fiction novel but this is our current reality. If nothing changes, some parts of the world will become uninhabitable within 100 years. You may not experience it but your children or grandchildren will. If just 20% of the estimated 1 billion (200 million) people affected by climate change decided to migrate over the course of a few years, entire cities and regions could be emptied, and it’ll increase housing prices in more habitable major cities in North America such as Toronto. Apart from doing your best to reduce your carbon footprint, it’s important to prepare in other ways such as using technology to make different industries greener. In any case, leveraged investing in the hot real estate markets of the colder cities of North America could give you tremendous returns.