Investing is about competing visions of the future. Different perspectives on the outlook at a macro, market and asset level are embedded in estimates of an asset’s value. Given the long-term nature of real estate, understanding structural trends and macro themes is essential. Today’s real estate investors, for example, will benefit from having a strong knowledge of demographics, technological innovations and labour market developments.
Identifying significant structural trends is not always easy, however. Leaving 2020 aside, change is typically incremental: our lives do not normally shift dramatically from year to year. But they do evolve meaningfully decade to decade.
It can be hard to perceive how society, and consequently our use of real estate, is changing. Sometimes, major structural trends are hiding in plain sight – even when they relate to something as important as how we meet the person we choose to spend our lives with.
Traditionally, partners often met through introductions from friends or family or at work. Today, most new relationships begin online, as a recent report by Tyro Capital Management highlighted. Aided by increased smartphone usage, what was a cultural taboo has become a cultural norm.
With the rise of dating apps, the search costs associated with finding a suitable candidate for a date have dramatically fallen, while the supply of good potential matches has expanded greatly. It is easy and quick to find a promising date from an almost infinite supply of candidates. And the risks associated with dating are lower. Specifically, online dating is safer for women. Rejection takes place virtually rather than in person, and prospective dates can be well vetted. And, if that date happens not to work out, there is no need to worry about seeing them in the office or when hanging out with their friends.
The world of Tinder and Bumble might seem far removed from property, but the changes that have revolutionised dating are set to have a significant impact on real estate investing in three ways.
First, online dating is an under appreciated factor determining household formation. People are getting married and starting families later in life. Economic uncertainty and high housing costs are often presented as primary reasons for this. These are important drivers, but by no means the only ones.
Improved dating opportunities with lower costs incentivises people to be more selective when choosing their partner. The pressure to settle for an average match rather than risk being left on the shelf is reduced. This has the effect of extending the average years of singledom. This, in turn, will increase demand for certain types of accommodation – rental apartments targeted at young professionals, for example.
It is not all positive for apartment demand, however. Properties catering for fragmented families and divorced parents may see a decline in interest. The superior matching that occurs through online dating is one reason divorce rates are falling and expected to continue to do so.