Global warming and real estate speculation

Factual Questions
1

It seems to me that if global warming is inevitable, and significant consequences will start showing in the next couple of decades, then why isn’t there a real estate boom going on in Canada and the northern United States - not to mention Siberia and places like that?

I would think that, as the world warms up, certain areas that once were inhospitable to people and agriculturally nonproductive will soon become valuable. At the same time other areas that are highly populated and productive will become seared and/or flooded.

If I had any money to invest and any balls at all, I’d be buying up everything from South Dakota to the Northwest Territories. Of course I don’t have either of those things, so I’m just sitting at my computer asking these questions to the Dopers out there.

So why no land grabs?

2

Because we’re not stupid enough to sell.

3

Most people, even really rich people, can’t afford to have their money sit idle for decades before it becomes valuable. Buying real estate in North Dakota now hoping that it will get a better climate in 2100 is worse than useless, because there are actual costs in the form of taxes, maintenance, and security that will eat away at your money.

And nobody will a real understanding of global warming thinks that highly populated areas will become flooded. The ocean will rise by about a meter. That will eat away at a lot of coastal properties, but won’t flood anyplace in the U.S. I suppose even that much might hurt a good deal of Bangladesh, but they’re not buying any Canadian real estate to sock away for next century.

Droughts are a bigger problem since they are already occurring. However, we have no good way to predict exactly which areas will be hurt or helped over the large number of decades involved.

Real estate is immediate. Global warming is long term. There will be some changes in the next couple of decades, but it will take most of the century to really alter the world. Few people today will be able to make money off its course.

4

Of course they can. They do it every day. People who have more money than they need to live on are happy to invest the surplus in things that won’t pay out for decades. Even I have a retirement account.

Furthermore, it’s not like the Dakotas are an icy wasteland. There’s plenty of farming and ranching going on there right now, but if some of the global warming predictions come true, it will be even more valuable.

5

No, I expect there will be a ton of money made and lost over global warming. Those with the vision to see opportunities and the resources to take advantage of them will become filthy rich, while those who lack one or both of those assets may be left behind.

Of course no one really knows what will happen with GW, but if some of the more extreme predictions come true, then success may be measured in terms of mere survival. But even if you go with the mildest predictions there will be small but economically significant shifts in geography, population centers, commerce, etc. and all of that opens up great opportunities for the wisest and luckiest of us. After all fortunes have been made on 3% markups.

6

Maybe because there’s still plenty of cheap land in warmer climates?

Also, “global warming” is a misleading term, it’s not like the entire planet will warm up by an equal amount. The climate change for a particular location is not easy to predict. As global climate patterns change, some places may get very warm, others very dry, and some places may even get colder.

7

If your money is “idle” sitting in your retirement account, you need to fire whoever is running it.

Your money is not idle. It is earning several percent interest and compounding annually. That’s what a normal investment does. Presumably, your money is also completely liquid so that you can move it around to get the best current interest rate. Not something that can be done easily with land you’re saving for 2100.

None of the rest of your statements are correct, either, economically or otherwise.

As I said, drought is a serious potential problem. However, those areas dried so that survival is threatened will be highly localized, and few of them will be in the U.S. No other extreme prediction is at all likely to come true, and the worst effects are 80-100 years off. Here in Upstate New York, we look forward to the day when the Great Lakes become a magnet for people who have run out of water in the south and west. However, nobody can afford to hold their breaths waiting for that day to arrive. If it does, assuming that no other solution to the problem can be found.

Could you name them? [I’m pretty sure you mean “profit margins” rather than “markups” in the first place, but try naming either one that led to fortunes.]

We already know the answer to your question. I gave the reason why. Investment strategies are gauged in terms of years, not decades, to recover initial investments.

There will be in the future enormous shifts. But today those are both far off and currently swamped by other here-and-now effects that are far more powerful. Your strategy is like filling an explorer’s boat with trinkets for trade while ignoring food and water to make the voyage. Or hiring an interpreter when you don’t even know what language the people you find will speak. Your economic policy is about equivalent to playing the lottery. There isn’t enough information to make a knowledgeable decision.

8

Let me do this one first.

Really? So you see the Dakotas as an icy wasteland? I’m sure it’s not as lovely as your upstate NY, but there are lots of people living there and doing just fine. Perhaps you need to get out more. :cool:

I think, perhaps, that you have some misconceptions about real estate investments. I don’t claim to be much of an expert myself, but I did live through Austin’s real estate boom, bust, and resurgence, and invested in some property through it all. I knew at the time that I bought each property that I might not make any money in the short term, but I had confidence in the Austin market, and that, given time, my investments would pay off, and they did, even the one I made in 1984 just months before the bottom fell out. Today that property is worth over twice what I paid for it, it’s paid off and through it all I’ve been getting monthly rental payments. So 23 years later I still own the property I bought in 1984 and I intend to own it 20 years from now.

That’s the way most real estate investment works. Normally you don’t just buy some property and let it sit there, but you lease it out or work it somehow to cover the payments, taxes, etc. In most cases. you’ll eventually sell it, but that timing will vary greatly on a person by person basis.

Of course there are those investors who buy real estate with no plans for it other than to flip it at the most opportune time. I saw plenty of those, also.

Then there are people like my brother who buy land simply because they want to own land. They just like to go out on their property and enjoy it. The economics are secondary, and their only plan for it is to pass it down to their children and grandchildren.

I can see any of these three types of investors, if the circumstances were right, investing in land that they expect might benefit from global warming whether that be in northern climes or elsewhere.

Based on my own experience and my own observations your broad statement that “(real estate) investment strategies are gauged in terms of years, not decades, to recover initial investments” is simply not true except for the "flippers"and even they could come out ahead with this “global warming speculation”. After all you wouldn’t necessarily need to wait until the full effect of global warming kicked in for a property to appreciate. If the theory is correct (and granted it may not be) that northern states and Canada will become more habitable and productive in the foreseeable future, then the mere expectation that that will happen might be enough to trigger speculation and if you start seeing measurable changes that are attributable to global warming such as slightly longer growing seasons, that could certainly do it.

Ultimately it may just be that global warming presents us with too many unknowns for speculators right now.

9

Really? I’d have thought it would mean the loss of considerable areas along the gulf coast, or at the least would require building a few billion dollars worth of flood defences to prevent such an occurrence.

10

Where have I heard that before?

I said it would eat away at coastal areas. Considerable? I don’t know. How much land is actually less than a meter above sea level? Very little, I would guess. And we will have 80-100 years before it gets to that stage.

11

Well, from you for one. What’s your point?

But I’m just, well, speculating. I’ve not yet heard a convincing answer.

12

And that not in our lifetimes, but more like 2 generations hence.

wiki “In 2001, the Intergovernmental Panel on Climate Change’s Third Assessment Report predicted that by 2100, global warming will lead to a sea level rise of 9 to 88 cm.” I will likely not be alive in 2100, and I doubt many Dopers will be.

13

Probably not - but you have to factor in that ANY land would then be one metre less above sea level, and more vulnerable to weather and tide events. If you have a nice flat plateau that is nowadays, say, five metres above sea level in an area prone to storm surges of four metres, it’s time to evacuate or start fortifying.
According to wikipedia hurricanes have produced extreme storm surges of 7.5-8.5 metres in places like the Gulf Coast and Bangladesh, - so raising the sea level by a metre could cause worries for people living 9 metres or more above sea level, depending on the area. Coastal areas tend to be very densely populated, and certainly for places like the Maldives, Netherlands, Denmark, Bangladesh etc. a rise of even a few centimetres would be a major concern for millions of people. Factor in the possibility of changes in weather due as well, and anyone in those areas who’s hoping to be alive in 50 years or so has cause for worry.

14

You’re changing the situation from flooding because of rising ocean levels to the occasional risk of storm damage. Two different scenarios.

This is also another case in which the forecasting is hazy at best. A widely-reported study (reported on here) gives scary numbers.

But note that the study gives no time frame at all for these predictions. And that the direst warnings are part of a worst-case scenario. What are the odds that the worst case will come true? Nobody knows.

Bangladesh is in interesting example to work with. It now averages 16 cyclones per decade and is prone to massive flooding along the coastal plain from these storms.

But it also is the catch basin for three major rivers. And monsoon rains annually flood those areas up to 12 feet deep. What’s the likelihood that as global warming occurs, the monsoon cycle will be disrupted and the annual flooding diminished? You can find evidence saying that monsoons have increased and that they have diminished.

I’ve said repeatedly that coastal areas will be affected. What we don’t know is how much the effect will be and when it will become dangerous. Or what other effects will be at play.

Should we do something about them? Obviously yes. Nobody is disputing that. I’m not at all sure what you’re arguing against. I even mentioned Bangladesh before you did. My statement that the Bangladeshis won’t be buying Canadian real estate holds.

15

There was an article about this in the Atlantic Monthly a few months ago:

16

Here’s the nub of the issue. Compound interest. Invest your money at 1% annual appreciation, and in 70 years your money has doubled. Invest your money at 2% annual return and it doubles in 35 years. At 7% it doubles in 10 years, and so forth.

So suppose you buy up vast tracts of land in North Dakota. How fast do you expect to see the value of that land double? If you think it will double in 10 years, then it seems like a pretty good investment, because that’s a 7% annual return. If you think it will double in 35 years, it’s a terrible investment, because you could put your money into risk-free investments with a greater return than 2% interest. Note that this is assuming no property taxes, no transaction costs, no mortgage interest, and so forth, just straight appreciation of the land value. And it doesn’t take into account the income you could recieve from that land, if it were rented out. But North Dakota farmland is cheap nowadays because there’s plenty of it, the limiting factor in farming the great plains isn’t land but water. It’s going to be pretty tough finding a rancher or farmer or miner willing to rent that land from you.

It doesn’t seem to me that global warming is going to double land prices in North Dakota in 35 years. Land in North Dakota may be more valuable in the future, but the rate of appreciation is not very high. Compare this to property values in some cities which have doubled and redoubled and re-redoubled in that time, and where there are always renters.

If you think you can buy land in North Dakota, rent it out, and double your money in a decade or so, you’re dreaming.

17

What if inland areas like ND become much dryer? Then you are stuck with worthless land. Its like taking a bet-except the odds are unknown. Personally, I think the biggest effect of GW will be aridity in central areas of the continent-and of course, coastal flooding. So, I’d stay about 10-20 miles from low-lying reas, and try to avoid flat land (like ND)-these ares are subject to tornados.

18

I see people at work who are wanting to buy a house rule out houses near the sea because they think they will be under water in 10 years time.

19

How so? The two are intimately related. Trying to separate them is like saying that drought has nothing to do with fire risk.