What the Real Estate Market Can Tell Us About the Upcoming Economic and Societal Shift of This New Decade

What the Real Estate Market Can Tell Us About the Upcoming Economic and Societal Shift of This New Decade

November 12, 2020 0 By aure

Tl;dr: after a general tendency of merger, the world is about to go through a “deplatformization” period.

The last ten years have seen an almost exponential rise in rent prices in global cities. In this article, I’m using real estate as a case study to describe a tendency of capitalization and merger that was ongoing throughout the entire 2010-2020 decade.

I argue that the pandemic eventually ended it, and that globalization is about to undergo a major reversal.

The Dutch Case

When I moved to study in Rotterdam in September 2015, I easily visited 7 or 8 apartments and eventually settled on a €315 20 sq/m room in a shared apartment on the other side of the river.

At the time, rents in the center did not go over €500. That was about to change.

Two years later, things had drastically evolved.

People started fighting for crappy rooms rented out for €550.

As I was leaving Rotterdam after I had completed my bachelor’s, a room in the center easily went for €650, up to €850 (let’s not even speak of Amsterdam).

The Dutch real estate market had been set on fire for three reasons.

The first one was Brexit.

International students that sought English-speaking studies turned themselves towards the almost-as-equally good Dutch universities and abandoned the UK.

After the referendum, settling in a country where you didn’t know whether your rights were going to be guaranteed did not appear to be such a good idea.

The second reason was the Netherlands’ attractiveness (on top of radical marketing) to international students.

Real estate was cheap in the Netherlands, studies were cheap, getting a job was easy, people were nice, the country was safe, the cities are beautiful, there is a mountain of history, art and culture and anyone can live there without bothering to learn the local language.

Also, there is weed.

It was THE best destination in Europe for international students.

For people such as myself that looked for easy solutions, the Netherlands was it!

The third reason that explained people moving en masse was the economy.

The job market was booming due to the Dutch high efficiency, productivity, and smart tax system.

It didn’t take much time for young graduates from Spain, Portugal, Italy, and Greece to enthusiastically move in and enjoy a much higher quality of life than they had back home (although they’ll always be happy to tell you how awesome their country, food and people are, “but the economy is bad”).

Such a rapid increase of people in Rotterdam fueled the real estate market which took 30% of value in three years, while the rents easily doubled in some cases.

Rotterdam wasn’t the only city to suffer from this phenomenon.

Paris, Lisbon, Barcelona did too, but it was more due to Airbnb and foreign investors than it was international students and workers.

Berlin went nuts for similar reasons than Rotterdam. As for Warsaw, Prague, and Budapest, it was a combination of both more students and more Airbnbs.

The pandemic ended all of that.

The Worldwide Real Estate Market Is Shifting

Since the pandemic hit, rent prices have been going down.

The current work-from-home model emptied cities such as Paris and New York where inhabitants used to spend much more time outside than inside due to the small size of their accommodation.

Most of them have gone back to their families, en province (in the countryside).

While most companies had always been frugal about establishing work-from-home policies, some (Twitter, for example) quickly understood that their employees weren’t about to come back to their offices.

The skip of the morning commute and the freedom to wake up at 8h59 to start work at 9h00 represent perks that workers are not about to let go.

Who would be insane enough to swap work-from-home (work-from-bed in certain cases) for commute, rain, early rising, and disagreeable colleagues?

The office is now, effectively dead.

Being a Digital Nomad Has Never Been So Easy

While the access to the digital nomad lifestyle used to exclude anyone that wasn’t independently working on the internet, everyone has now gained the right to become a nomad since everyone is working almost only online.

The dream of the 30% Parisians that kept on telling themselves they would soon leave Paris is finally reachable.

As such, the northern cities that attracted so many people because of their jobs have suddenly become very unattractive in light of the possibility to leave them.

Why live in Amsterdam and pay €800 for a room if you can rent out a beach-front apartment in Spain for €400?

Why going out under the rain to buy bread in Brussels if you can buy fresh seafood in the market of Thessaloniki?

As the southern expats will tell you, their countries offer the best quality of life in the world.


The job problem has now been fixed.

The Real Estate Market Is About to Rebalance on a Northern-Southern Axe

The newly gained freedom to work from anywhere in the world will not remain unclaimed. We are about to see a shift of online employees moving south, searching for an even higher quality of life than what they had been enjoying up to then.

Greece is at the forefront.

They announced early November new tax-breaks to anyone working online and deciding to relocate in the archipelago.

Most likely, they won’t be the only ones taking these measures.

As such, we can expect a flocking of people that seek cheaper cost of living and a higher quality of life towards southern countries.

The North Is About to Get Much Cheaper 

After a steady rise in rental prices, Northern cities are about to get much cheaper.

First of all, there aren’t as many students as in the past due to the inverting of the demographic pyramid.

Second, families don’t have as much money to send their kids to study abroad.

Third, international employees are not about to come back. Furthermore, local employees may themselves decide to desert the city to relocate to the countryside, or into another country with a more favorable climate.

Fourth, the need for office space in cities is about to drop like a stone.

Personally, I believe these offices will be converted into open-space offices such as WeWork, or into…housing.

Fifth, this conversion will lower even more rental prices.

I had the pleasure to experience myself the phenomenon when I moved to Warsaw in September 2020.

I was offered to visit 9 units for which all landlords were willing to negotiate, despite the fact I had asked for a 3-months exit in the contract.

Finding an apartment had never been so easy, although I was looking during the high period.

The Signs of the Upcoming Shift

In August 2019, I interviewed a hotel manager in Brussels in the context of thesis writing. He told me that things had never been so good.

The hotel was almost always full and customers had never been happier. This success had prevented management from reinventing themselves as they need to do so wasn’t being felt.

This period coincided with the brief yield curve inversion in the US. The upcoming financial crisis was long overdue, were we being told, as the stock market broke record after record.

Things were so good that I naturally thought they were about to end.

After all, a steady rise always preceded a steady fall.

But the feeling wasn’t just about finance.

I felt somehow that this phenomenon of “always more” seemed to have been going on for a while.

Every year, I’d read in the weekly political magazine my dad was buying that student costs were up; rents were up; applications to universities were up; global production was up; inflation was up; Apple iPhone sales were up; the stock market was up; art prices were up; temperature and pollution were up; the number of millionaires was up; overall, profits were up.

Similarly, low salaries were down (economic inequalities were up); manufacturing jobs were down (not restricted to the West); population in mid-size cities and villages were down; mom and pop businesses were down; main street retail chains and shops, were down.

I couldn’t get my eyes off the fact that what was strong at the beginning of the decade, had got stronger. What was weak, had got weaker.

Somehow, the hotel manager’s confidence in the future rang like an alarm bell to me. I left him thinking that the favorable economic cycle we had been into was about to stop and reverse.

I just didn’t know where it would come from. In my eyes, the most likely scenario was a financial crisis inherited from the US student-loan bubble.

I didn’t see much difference between people incapable to repay their mortgages and people incapable to repay student loans, besides the existence of collateral.

I never would have thought that the catalyst for change would be in fact, a pandemic.

The Bottom Line

The decade 2010-2020 was a period of economic, social, and practical concentration and capitalization. It was a period of evolution and deepening of “current states”.

Whatever was strong, got stronger. Whatever was weak, got weaker.

Attractive cities attracted more people. Unattractive cities lost their population.

Best universities attracted more students. Low-ranked universities attracted fewer students.

Real-estate spiked in popular places. And crashed in the abandoned ones.

Industries that were doing well, thrived. Industries that weren’t doing well, disappeared.

The US dollar became the uncontested worldwide currency.

Big companies, merged, and got even bigger (chemistry, tech, automotive, media, telecom). Many small and medium enterprises that struggled, went bankrupt.

Attractive people broadened their dating horizons. Unattractive people lost the little that they had.

The successful US movies became even more successful after going global. The small local cinema lost its public.

Everywhere, the world concentrated into a handful of players that grew in size. Facebook went from 500 million users to 3 billion. Amazon went from 2 countries to almost 20. Airbnb went from one listing to 4 million.

China started the decade growing silently and became the uncontested economic and military power of the region.

South-East Asia and West and Central Africa considerably developed.

The West, badly hit by the Lehman Brothers crash, got even more decadent.

English became the uncontested number one language learned as a second language, at the expense of French, German, Italian, and Spanish.

Overall, whatever was big and strong at the beginning of the decade, got bigger and stronger. Whatever was small and weak, got smaller and weaker.

Since the decade had started with an economic crisis, it seemed logical to me that it would eventually end with another one.

It did not. The pandemic did the job instead.

As such, I am now persuaded that we have entered an age of decentralization. After the period of mergers and growth will come a period of “demergerization”. After a period of quantity, will come a period of quality.

Companies have become big, bigger than states in many cases. Fortunately (?) GAFA are about to get hit with lawsuits from the EU and the US government heading their way.

Global cities, as we have seen, are about to empty. The expensive real estate is about to get cheaper, and the cheap real estate is about to increase.

The dollar, king of currencies, is about to lose its appeal after the trillion of debts printed to support companies during the pandemic. Simultaneously, the crypto alternative is rising.

For the first time in decades, Harvard has seen a huge drop in the number of students applying to its programs (they lost about 140 million in revenue) as students turn themselves towards cheaper and more practical alternatives such as online courses and apprenticeships.

Even though we’re not there yet, I believe that the value of a diploma is about to get eaten away by the demonstration of practical skills.

Overall, I truly believe we’re about to shift back to a local mode of living, less international, and less open to the rest of the world.

Globalization brought its share of advantages (trade, highly-skilled immigration, etc) but ended up being detrimental to the weakest among us (manufacturing jobs, low-income earners in cities, etc).

Globalization taught us that in an interconnected system, everyone depends on everyone.

A factory closes in Europe. Another one opens in India.

A guy eats a bat in China. The whole world gets sick.

This period of concentration, merger, and capitalization is over.

Welcome to the period of “demergerization”.

International will shift to national. National will shift to local. Big will shift to small. Open will shift to close.

People will mind their own lives. Whatever happens on the other side of the world won’t matter.

Monopolies will fall and be replaced by local companies.

20 years ago the world opened and went global.

It is now about to close and go local.

Picture credits: Photo by Karsten Würth on Unsplash