How climate change and self driving cars might sink property prices

My wife and I bought a new house two years ago. We had a wonderful time  in our inner-city apartment, but it was time to move on. With a third  kid coming we wanted a quieter street and a house with a garden. We  fancy old houses. Luckily we have lots of them in the Netherlands. We  settled on a cute house built in 1915 for the local police and fire  fighting department chiefs. Being less than 2 km from our previous  house, it’s still inside the city.

Our house stands 1.2 meters above sea level, which is quite  surprising as half of the country lies below sea level. Cities like  Amsterdam, Rotterdam and The Hague all lie below sea level. The lowest  point in the Netherlands is 6.76 metres below NAP in a village called Zuidplas. 

It’s kind of strange that we - the Dutch - never talk about this. Yes, we are masters in Hydraulic Engineering  to protect ourselves against the water. It has kept us safe and  prosperous for ages, so everybody assumes it will in the future. But the  climate is changing at a rapid pace. We are taking action, but is it enough?

The Netherlands is also famous for its enormous household debt.  We - a population of 17 million people - have 651 billion euro of  residential mortgage debts. At 111 percent of our GDP, it is the highest  mortgage debt in the eurozone. 

It doesn’t help that the European Central Bank creates 80 billion  euro - yes, € 80,000,000,000 - each month. How much is € 80 billion? An  average price of a Dutch house is € 240,000, so € 80 billion buys you  330,000 houses. Roughly the city of Utrecht. Each month. This money  injection forces all interest rates down including mortgages. Borrowing  money has never been so cheap, which results in more and higher  mortgages. 

Yet, the value of all privately-owned houses is twice the amount of  this debt. And we have savings and pension entitlements that by far  exceed the mortgage debt. But how much are our houses worth when they  are under water due to rising sea levels? The North Pole currently is 20 degrees (!) warmer than normal.

Climate change might not be the only trend affecting property prices.  Self driving cars might affect the prices of houses inside the city  too. 

I have a boring European car. It’s over 10 years old and my three  kids hardly fit in it, let alone all the baby equipment. But it doesn’t  matter, because we don’t use it much. My wife and I both ride our bikes  to work - so Dutch! And we live in a lively part of town with all kinds  of stores and restaurants around the corner. 

I’m looking forward to a future where all cars are self driving. And  if I don’t drive myself, I don’t need a steering wheel or a stick shift  anymore. I don’t need to be forward facing. I’d rather see my wife and  kids when I’m talking to them. And I don’t even need windows, they could  be screens to watch a movie, play games or do some work. 

One of the promises of self driving cars is that they will be safer than human driven cars. 1.25 million  (!) people died from road traffic injuries in 2013. And 20-50 million  people sustained non-fatal injuries from road traffic collisions or  crashes. 

But if driverless cars are much safer, do we still need speed limits?  Why not drive 200 km/h or faster on a highway? Having diner in Paris or  a meeting in London doesn’t sound so strange anymore! When you can have  drinks, take a nap, watch a movie or do some work on the way to the  destination. Would autonomous cars start competing with bullet trains  and short-distance flights?

I’d rather not own a car at all. A car as a service sounds more  attractive to me. Give me car when I need it, to take me wherever I need  to go. For a decent price of course.

The future doesn’t look great for taxi and truck drivers. But the same  goes for car repair shops, driving schools, car distributors, motels,  and the list goes on. When autonomous cars are a service, they will be  on the road most of their time. Parking, repair and maintenance will  happen in a few places outside of cities. And since all self driving  cars will be electric, there will be no need for gas stations.

If the costs of using self driving cars are low enough, will we still  need public transportation? Using driverless cars might even become  free. Attention is a valuable good these days, lots of companies want to  get a piece of your time. Does this mean that all the rail roads, train  and metro stations will become redundant?

The city could change quite a bit in the future. Parking spaces take up a  huge amount of space. If we don’t need them anymore, what will we do  with that space? And what will happen when you can work while traveling?  Wouldn’t you rather live outside of a city? How would this affect the  valuation of housing prices?

Real estate used to be a long-term, stable investment - as safe as  houses - and it will stay that way for a while. Looking at the chart  above - showing the average housing prices in the Netherlands in % and €  - everything seems fine. Yet, climate change and driverless cars are  two trends that could change this. 

As a good Dutch citizen I have a decent mortgage debt myself. I’d  rather not have this debt, but it feels like a necessary evil to get a  proper house. Property prices have risen the last decades and that is  comforting. Yet, it’s questionable if that will continue in the same  way. 

Is my real estate investment at risk? Should I move to a city that  lies above sea level, or even to the countryside? I don’t know. I’m  happy with where I am now, but I’m definitely going to keep an eye on  how these trends play out.