Amazons Housing Play
Quality, Consequences and the Construction Industrial Complex (part 163).
If you are a residential developer, builder or contractor be afraid, be very afraid!
The property industry is not famous for innovation, R&D, productivity increases or happy customers but Amazon is excellent at all of these and it has just entered the housing market.
The Amazon Alexa fund has invested in “Plant Prefab” a Rialto California USA firm specializing in custom sustainable homes. Why should you care? Well, lets set the scene before I suggest why this matters.
There is a mass delusion in the USA, Canada, Australia and the UK that:
1. Your house is an investment. It is not, it is a consumable and makes you a target for taxation.
2. Houses are a good ROI. They are not, they are illiquid and the stock market beats housing in all metrics. At best, houses are an inflation hedge.
3. Developers deliver high quality housing. They do not IMHO, mainly because of delusions 1 and 2 above and low consequences for poor work.
Housing is a basic human need, to live safely and in dignity is a basis human want. However there is a housing crisis in many countries due to:
- Mass, rapid urbanisation
- Miss matches in supply & demand
- Bureaucratic red tape and land banking
- City property bubbles
IMHO there needs to be a reset i.e. a 25% to 50% fall in the housing market, I believe this would be a good thing in the long run. The cure for high prices is high prices in that high prices lead to bubbles bursting. Affordable, on demand, high quality housing needs to be brought to the market to pop the property bubbles and break the cycle of long construction cycles and local monopolies exacerbating the housing crisis.
The Alexa Fund is a $100 million Amazon venture capital division that invests in voice technology. For example, this year the fund also invested in smart home thermostat maker Ecobee. Yes, NEST is not the only game in town.
Amazon is emerging as the market leader in voice control technology (see ya, Siri) and according to Paul Bernard, Alexa Fund’s director, there are now more than 20,000 Alexa-compatible smart home devices from 3,500 different brands. Paul Bernard notes “Plant Prefab” is a leader in home design and an emerging, innovative player in home manufacturing”.
Prefabricated homes, have quality control advantages over poorly managed, traditional chaotic onsite construction in the form of a highly controlled manufacturing and assembly environment. This leads to:
- High quality outcomes.
- Cost certainty.
- Ability to deliver on time i.e. the Holy Grail.
However in the big picture there is a grand strategy here. This is a big data play. By getting Alexa into homes and connected to as many devices as possible the data harvesting will be epic and will in time create another revenue stream for Amazon. The new battle ground for Amazon, Apple, Google and Microsoft is the home itself. It will be a winner takes all “game of thrones”.
There are some very serious privacy concerns with an Alexa connected home and for me that is a “red line”. I would pay a premium not to have Alexa in my home but that is a big subject for another day.
Personally I have an emerging dream of buying a plot of land and having an affordable prefabricated “Bauhaus” inspired home built to my exact requirements i.e. awesome and low carbon. Plant Prefab would work for me.
With giants like Amazon entering the housing market there may be hope for a real change in housing. I think I will be buying more Amazon stock this week.
Twitter: @BLDWhisperer
Sources:
https://www.curbed.com/platform/amp/2018/9/25/17899200/amazon-alexa-prefab-construction-startup
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