At its root, real estate investing works something like this: an investor takes a pot of money, invests it in a building, and then hopes that the building will go up in value, either so they can sell it for a higher price later on or charge a higher rent. All of the derivatives in the housing market ultimately come back to this basic equation. If the cost of housing goes up, the derivatives go up too, and investors win.
But there’s a problem. Despite the best efforts of governments and special interests to restrict the building of new homes to bump up house prices, technology is forcing the cost of housing down, and its impact is going to be profound. Lower cost housing could potentially mean that investors lose out, especially if they think that house prices can only rise from here on in.
Here are some examples of the technology transforming the real estate sector, and how investors don’t have a clue.
3D Printed Buildings
Eric Schmidt, president of Google and technologist recently spoke at a forum in California on technology. He pointed out that 3D printing is a lot more advanced than most people realize, and soon it’ll be printing out houses. A regular house, he said, takes about 18 months to construct, requires an enormous amount of manpower, and is damaging to the environment.
But a house built using 3D printing can be printed out in a day – and to a much higher build quality to boot. Schmidt pointed out that these building methods would reduce the price of housing close to the cost of the raw materials, fundamentally transforming the construction sector in ways we can’t really imagine.
Regular real estate investors should be worried. When this technology really gets going – and it will – they will quickly find the price of their assets falling, all thanks to the incredibly cheap way in which houses can be constructed.
Because 3D printed houses will be of higher quality than regular homes, they’ll act as a pull factor in the market, turning buyers off lower-quality “old-build” homes. As prices go down, investors will suffer.Some advice? Get on the 3D printing train early.
Home Made In Factories
Since 2011, the number of manufactured homes has been on the rise. Far from seeing mobile homes as substandard, people now view them in a far more favorable light. Like the 3D printed homes of tomorrow, they’re customizable and higher-quality than most currently-available brick-and-mortar builds.
Investors need to watch out. Again, we’re in a trend here: more and more people are opting for mobile homes that keep the elements out and provide the space they want at a much lower price. Rather than investing in regular construction companies, there’s an argument to be made that investing in home manufacturing companies is the way to go.
After all, they are the ones with the most experience of the factory environment, and they are the people who will most likely push technology forward in the future. It’s far easier to integrate a home into a smart city in a factory than it is to do using traditional building methods.