Imagine being able to buy a brand-new three-bedroom home for under $100,000 in the next 10 years. In your dreams perhaps?
Not according to former senior White House economic adviser and CEO/founder of US-based Geopolitica Institute Dr Pippa Malmgren, who was in New Zealand last week to address delegates attending the Chartered Financial Analysts Society investment conference.
Malmgren warned the building and construction sector is in for a dramatic shakeup in the near term as revolutionary modular housing and 3D-printed homes and neighbourhoods are already a reality, and physical AI becomes a force beyond simply ChatGPT.
“Right now, we think of AI as words on a screen. But AI is much more than that. It is now being programmed to construct physical realities, including buildings. So you can say ‘I would like a building there’ and AI will literally be able to make that happen, and you’ll have one within a matter of days.
“As an example, in Austin, Texas, where I live, we have a company called Icon, which has already been commissioned to build the first structures on the moon by Nasa because they specialise in 3D printing using very, very sophisticated carbon-friendly concrete.
“And so in Austin, they have not only built new homes this way – and I’m talking big three-bedroom, beautiful residences – but they have already built entire neighbourhoods this way. So this is important because people say, ‘Oh, well, a 3D-printed house, you know that’s 20 years away.’ No, it’s not. It already exists right now. And these homes are already costing about half the price of an existing home in Austin and will almost certainly fall further.”
Malmgren points out that a conventional new build in Austin will cost you upwards of NZ$1.1 million currently, but 3D-printed homes are already being produced for $500,000 and are expected to eventually fall to just 10 percent of that figure over time.
And we’re not talking unappealing modular boxes, these are beautifully crafted homes that can be specifically spec’d according to the wishes of the customer, as well as incorporating geotechnical requirements in areas that are potentially earthquake-prone or subject to liquefaction.
It’s not just the construction and design process that is set to change. Your house will become a revenue source as well, says Malmgren.
“These homes will all be equipped with Tesla Powerwalls. That means that you’re able to utilise solar energy to power your home, avoiding the need to pay energy bills any more. And any excess power gets sold back to the grid. Now, that’s a revolution because the grid owners are starting to say that the customers themselves are turning into the suppliers. And suddenly, you have much more abundant energy in any city because almost every home is also a power generator.”
“And so suddenly, your house just turned into a cash receipt that is not only giving you free energy, but also generating extra cash to help pay off the mortgage.”
Malmgren also highlights the associated financial innovation that has the potential to be the real game changer as a result of ‘tokenisation’.
“We’ve already seen the first tokenisation of both private homes and big office buildings being initiated by a company called Homebase.
“They recently brought together around 2,000 investors to buy a $250,000 one-bedroom home, where each investor is able to share the rental flows in proportion to their investment. So for as little as $20 you can receive a share of a property’s rental stream using a fractional ownership model in the same way you can now buy $20 worth of Apple stock and share in the dividends.”
Malmgren describes this as a revolution for several reasons.
“Firstly, ordinary investors are now able to participate in a sector that, traditionally, was dominated by the BlackRocks and Vanguards of this world. Second, you’re able to have access to a passive income stream from what is traditionally a highly reliable source, which is homeownership and rental flows. But it’s also a way of completely [bypassing] the traditional bank mortgage system that requires all kinds of criteria to be met in order to qualify.
The implications of these developments are set to have a profound impact on the banking sector in particular, given the implications for existing property valuations, but also for those who have a substantial amount of their investment portfolio tied up in property.
Malmgren is unmoved by the implications this latest turn of events will have which has been a feature of technology disruption in recent decades that now has the housing sector in its sights.
“Firstly, why did anybody think that the best store of wealth was your home and also, in many cases, your portfolio of investment properties. A home is actually different from an investment, but we’ve kind of conflated the two things. We’ve done the same thing in the US because we wanted to increase home ownership. But what’s increasingly happening in the world of finance is decentralisation, which is separating your home from what is good investment strategy.”
As economic historians will tell you, go back 60 years or so and residential housing wasn’t considered an investment class in the way it is today. You sold your property for a bit more than what you paid for it, but you didn’t expect to see the massive valuation increases we see today.
And why will the once invincible property market be disrupted so dramatically, according to Malmgren?
“Because the boomers are so numerous and there’s nobody coming behind them on the same scale. We don’t have enough people in the younger generations to buy all of the homes that boomers own and at the prices they want to sell them at.”
There’s another important consideration that she cites: declining birth rates.
“Young people stop marrying and having children because the number one factor … is do I have a safe home?
“And if you don’t have a safe home, if you’re a renter, if you’re not an owner, you don’t feel safe. And this is one of the reasons that people are postponing having children, and the birth rate has been collapsing in most industrialised countries. Even though most couples are earning a dual income … they are still not able to afford to buy their own home until well into their late 30s.”
Malmgren says the net impact of all of this is going to mean that boomers will really need to seriously consider whether they can truly depend on what they think their house is worth to support them in their later years, especially given the continued dramatic improvements in longevity.
And in New Zealand’s case, add to this the dramatic reversal in the immigration wave from a net gain of 173,000 in 2023 to just 12,400 this year as more and more people leave for Australia which saw a dramatic 17 percent spike of 7,200 additional rental properties being added to the national pool last month alone, according to realestate.co.nz (more below).
So, for Gen Zers despairing of ever being able to enter the property market it seems the coming wave of technology is going to fundamentally change things as we know it now.
As Malmgren points out, this is simply the next stage in the process of moving from “scarcity to abundance” that has been happening for the last two decades.
“The new Washington consensus is that Trump reigns, but the tech bros rule.”
And that suggests the extent of technological change we are about to see will hugely dwarf what we have already witnessed to this point.
US Fed rates decision to dominate markets this week
Unlike our Reserve Bank’s most recent OCR decision, which was almost a given, in the US the final decision for the year on rates from the Federal Reserve has investors crossing their fingers and hoping. And though a 25 point cut has already largely been priced in, a decision by the Fed to remain on hold will almost certainly rattle markets this week.
BlackRock CIO of Global Fixed Income Rick Rieder told Bloomberg Television he is expecting some dissents and disagreement at the next meeting.
However, the big talking point on Wall Street was Netflix’s audacious acquisition of Hollywood’s star prize Warner Brothers studios in a US$72 billion deal that just a week ago looked like it had little chance of succeeding.
Even Polymarket put the odds of the deal happening at less than 5 percent, yet the streaming giant managed to pull off one of the year’s biggest acquisitions that now gives it a similar clout in entertainment that Google has in search or Amazon in online retail.
The final agreement will, however, be the subject of intense regulatory scrutiny which is likely to mean it will be another 12-18 months until the deal is finally concluded.
“The combination of two of the largest streamers in the US was likely to be seen as anti-competitive” said one person close to Trump’s regulatory officials.
Local investors will be closely following the performance of Vista Group, a global leader in cinema chain ticketing and management systems, because of concerns that the takeover will bring into question Netflix’s commitment to cinema.
On Friday, the Financial Times reported that Cinema United, which represents 30,000 movie screens in the US, said it would oppose the deal, arguing it would risk removing “25 percent of the annual domestic box office if films that are traditionally given a robust theatrical release by Warner Bros disappear from theatres in favour of streaming”.
Netflix, however, has promised to meet Warner’s existing commitments to theatres as part of the acquisition deal.
Separately, and in a sign that institutional appetite for the world’s largest cryptocurrency remains subdued, BlackRock’s iShares Bitcoin Trust ETF recorded its longest streak of weekly withdrawals since debuting in January 2024.
Bitcoin ended the week down a further 1.4 percent at US$89,300 and is now down 4.5 percent year to date.
Rental market balloons as Kiwis flock to Aussie in record numbers
New data from online property platform realestate.co.nz has revealed a rental market awash with properties. A record 7253 spike in new rental listings hitting the market last month – a 12.4 percent increase on the same time last year. The total rental stock of 8801 properties has also increased by 17.4% year-on-year.
Sarah Wood, CEO of realestate.co.nz, says this significant lift in rental stock is likely a result of mixed factors including landlords opting to re-let their properties as opposed to selling them in a weak market, and the high number of Kiwis leaving New Zealand for Australia.
“We know New Zealand’s net migration loss to Australia has reached a 12-year high, and the majority of those moving have been in the prime tenant demographic – 20-39-year-olds. While this surge in supply of rental properties presents clear opportunities for renters remaining in New Zealand, it’s also creating a market that landlords and investors will need to navigate carefully.”
The excess number of rental properties could also be found in regional pockets with new rental listings at record highs in Hawke’s Bay, Manawatu/Whanganui, Waikato, and Wairarapa.
“To see all-time highs in new rental listings across four regional markets during the same month is significant,” Wood said
In November, the national average rental asking price reduced slightly by 3.1 percent to $626 a week, compared with $646 a week at the same time last year.
However, the West Coast and Southland were two regions that bucked the trend with the West Coast recording an average weekly rental rate in the $500 a week bracket for the first time, up 8.4 percent, and Southland recorded an 8.5 percent increase, with the average rent in the region of $483 a week.
Coming up this week
Wednesday
International Migration & Travel (Oct) – Stats NZ
ANZ Truckometer (Nov)
Hallenstein Glasson Holdings AGM
Trade Window SSM
Being AI SSM
Thursday
Domestic Trade & Business Financial Data (Sept qtr) – Stats NZ
Fonterra Co-operative Group AGM
Westpac Banking Group AGM
Friday
Electronic Card Transactions (Nov) – Stats NZ