Disruptive Technology: a new technology that unexpectedly displaces an established technology.
When talking about technology, disruptive technology in particular, investors often look for a tenfold change in productivity or costs.
While those kinds of gains have been appearing in the software industry for sometime now, improvements in large-scale material goods have proven more difficult – until now.
Disruptive technology has the potential to change the way entire industries work. So when faced with major life decisions such as planning a career or building a home, it always makes sense to review one’s options if and when things change.
The building industry is one industry that looks like it is about to see radical change. With the introduction of new technology allowing companies to literally 3D print a house at dramatically, and I mean dramatically, lower prices – things are bound to change.
In April, one company in China managed to print ten (10) 650 sq ft houses in one day for the cost of $5000 per house.
These are not papier-mâché houses. Made out of recycled materials and quick drying cement, these houses look to stand up to pretty much anything in the marketplace. In fact, because of higher precision manufacturing, 3D printed houses are said to be able to withstand three times the weight of a traditional cement house.
When you think of it, The production of pretty much everything we buy today is manufactured using an automated process – much of it coming from China. Accordingly, it’s not that big a stretch to consider purchasing a custom-built house over the web and having it show up to be crained onto the foundation a local company has poured for you.
Let’s look at some of the ramifications that may come along with this change over the next 5 to 10 years…
1. Continued increases in unemployment – especially in lower skilled jobs.
While employment continues to be very strong in Canada compared to the US, it is evident that as new disruptive technologies are implemented, employment is bound to drop.
Today, the construction industry is one of the major drivers of growth for the economy. Economists wait eagerly for new home construction numbers each quarter, and while these numbers may actually increase with a lower cost options in the market, the numbers of tradespeople needed to install them may drop substantially.
2. Lower tax revenues.
Property taxes are typically figured out on the formula of square footage and overall home value. While that is an oversimplified formula to a degree, it makes sense that your property taxes are going to be a lot lower on a $50,000 home versus the $500,000 home.
Expect pushback from city councils by not allowing these new properties next to existing – traditionally expensive – housing in cities to try and protect their revenue base. Initial builds will likely go towards lakefront property and granny suites for rental.
3. Lower mortgages.
It’s common for a couple with a $400,000 mortgage to end up paying well over 1 Million before it’s paid off. While land costs obviously figure into the size of a mortgage, it is typically less than 1/3 of the total sum.
4. Lower house prices.
Ultimately, lower cost home availability will mean lower home prices across the board. All other things being equal (such as supply and demand), expect the dramatic increases that real estate has seen in the last decade to slow.
Lastly, remember this… Each time a new class of technology comes in, people invariably start worrying that it will wipe out life as we know it. As pointed out in one of the embedded videos, back in 1900, over 60% of Americans were farmers. Today it’s less than 2%. The world adapted and we still have food, employment and a higher standard of living than ever before.
E.O. & E.