Autonomous cars will kill the real estate market

Autonomous cars are coming

Today (early 2017) there are too many clear signs that autonomous cars are going to happen. The question, of course, is when.

First, some important starting points.

  1. Autonomous cars are arranged into 5 different “levels”, where fully autonomous is Level 5. According to Toyota, nobody is close to Level 5 (I humbly agree). A Level 4 is when the car is autonomous in “most” conditions, while a human driver might occasionally be needed to handle a special condition (e.g. unexpected bad weather, an unusual obstruction, etc). Several companies are approaching production-ready Level 4.
  2. A Level 4, aided by “fixed” beacons, can be strikingly equivalent to a Level 5 in a specific area. In other words, if you take the Bay Area and convince the 6–7 municipalities to install a few thousand sensors/beacons at several intersections, and let cars read the signal coming from these beacons, you can expect these cars to be “practically” Level 5, even if they would be Level 4 in any other area.
  3. Point #2 suggests that, with a relatively small investment in infrastructure, we can get to fully autonomous cars RIGHT NOW. The only thing missing is either the political will to push for this, and/or private investments which can ignite this initiative.

What this means for Real Estate?

The cost of a square foot of a house in San Francisco is several times the cost of the same thing in Pleasanton (about 20–25 miles East of San Francisco, and usually about 50–60 minutes away if you drive).
If you could be transported at any time during the day, at an affordable rate, to and from Pleasanton and San Francisco, with the aid of an autonomous vehicle, all of a sudden living in San Francisco becomes less attractive.

As a consequence, real estate prices in San Francisco go down. Down, by how much? Hard to say. It depends on the different qualities of this imaginary transportation service. If it’s truly on-demand, and truly affordable, then… down a lot.

Housing will be heavily impacted by this.

  1. You no longer need a garage for your car.
  2. “Secondary storage” for your items becomes a more interesting option (you can easily imagine that, with autonomous vehicles in place, a company such as Amazon.com could easily offer you storage space with robots that can retrieve or deposit your items at the click of a button). As a consequence, you need less space in your house.
  3. Buying stuff becomes less interesting. If you can easily access your secondary storage, it also means that you can lend your stuff to someone else, easily. You own a drill? Your friend doesn’t? Let me click the app and voilà, my drill delivered to your doorstep in half an hour. Companies will try to sell you “subscription” instead of selling you stuff. Customers will probably get screwed somehow in the process.
  4. You need less space, you don’t need a garage, and you no longer need to live exactly in the city center to enjoy it. All of a sudden, housing that didn’t attract you becomes attractive. Demand for “central” living space goes down, and so does its price.
  5. Some companies will not be able to get out of this trap before it’s too late. A lot of money will be lost.
  6. Other companies will be able to either ride the wave of “affordable housing away from city center”, and/or to sell subscription services to their customers, effectively capturing most of the savings for themselves. Car-as-a-Service, to just name one, up to House-as-a-Service.

And the average Joe?

The average person will suffer a high chance to lose a lot of money in the process, mostly because once it becomes clear that this is happening, the market will steadily adjust and the individual who owns a house will have a hard time finding a buyer.

Where will it happen first?

I have no idea. This really depends on the political situation, and the level of investments being made. I would bet that by end of 2020 or early 2021 this phenomenon will become apparent to most people.

I really hope that, as a society, we take this opportunity to distribute wealth and freedom, rather than using it to extract more money for most people.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store