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Industry Opinion - Home Automation and the Credit Crunch (1/7/2008)

By Yasmin Hashmi, HiddenWires

You would think that with all the news of doom and gloom in the property market, those involved with home automation would be suffering too. Things may be getting tougher, but the manufacturers, suppliers, specifiers and installers we polled are keen to point out that in the face of adversity, there are plenty of opportunities for the home automation business:

David Graham, MD of Grahams Hi-Fi Ltd, and membership chair of CEDIA UK.

At Grahams Hi-Fi we have been trading for almost 80 years and have been working in the custom home installation market since the late 80s. Many of us remember when interest rates hit 16% in the early 90s. When money gets tight, people become more obsessed with value, but value is not an absolute amount, and can be had at GBP1000 or GBP100,000.

When markets are growing, there are many more players, but what separates the professionals from the amateurs is when things are tough. In bad times, we have found our business consistent, but we end up taking a larger piece of a smaller pie. Fortunately a large proportion of our work is in one-off high-end residential projects, so the doom and gloom which is in the media daily, often has less influence on these clients.

In a buyer's market, offering developers solutions which make their properties easier to sell and command a premium, as well as having all the correct boxes ticked in terms of residential infrastructure, are vital. 'Is the house wired for sound, satellite, cable, data, access control etc?' are questions buyers are now becoming more aware of. Many technology brands are now referred to almost on a generic basis, where Lutron and Crestron for example, are being used much in the way that 'Hoover' describes a vacuum cleaner. Support from manufacturers in making their brand awareness better helps us enormously.

Jorge González Rico, Sales and Marketing Executive, Ingenium

All around Europe, resistance to home automation is decreasing, and it won't be long before it becomes an integral part of the home's electrical installation. In fact people are talking less about 'home automation' than the 'digital home', in which users interact with numerous devices that are interconnected, and connected to the Internet.

In Spain, the home automation sector generated more than 15 million Euros in 1997, and this looks likely to increase tenfold by 2010. Between 15% and 20% of the 600,000 houses built every year incorporate home automation, and by 2010, we expect this to grow to 30%. While the current crisis in the property market is slowing down sales and promoting stronger competition, most new-builds are bought by younger people who tend to embrace technology, and consider automation as adding value to a home.

There are other drivers in the market too. The large telecommunications operators are becoming interested in the opportunities that the digital home brings to sell more services, and word is also spreading about the energy savings that automation can bring. Indeed the trade can help the market by focussing on the real needs of clients rather than providing services and features that they never actually use. We need to keep promoting the everyday benefits of home automation, and how it can make life more comfortable.

Lee Nunn, Managing Director, Faith and Gantry

The current housing slump should not have a big negative impact on the home technology market - in fact I'm quite sure it will have a positive one in the long term. The mass market for home automation is still in its infancy and there is a long way to go before we see the majority of homes being fitted with this kind of technology, so we are not talking about tens of thousands of installations being mothballed to the detriment of hundreds of installation companies.

From the home technology installer's point of view, it does mean that the market narrows and becomes more competitive - as it does for developers. But whereas for many years, developers have had the attitude of 'we are selling homes anyway, so we don't need to install technology', they are now waking up to the fact that properly-integrated technology sells homes faster.

The key is to do it well, with the right packages and for the right developments. We strive to demonstrate that home technology should not be viewed as an extra cost, but as an integral part of the build cost per square foot. Technology adds tangible benefits both to unit sales, in terms of adding value and increasing saleability, and also in dramatically enhancing the eventual occupant's way of life. If we can demonstrate how people can run their homes more efficiently, some say by 30-40% with effective home automation, then we will see a rise in the number of homes being fitted with this technology as standard.

Timothy Penn, Managing Director, AMX Europe

Headlines about the credit crunch and the sliding property market make very gloomy reading, but there are still plenty of opportunities in the home automation business. A home control system is the distinctive feature for either new properties or renovations, and it will ensure maximum impact with potential purchasers or tenants. The aspirational and luxury aspects of an integrated home are matched by less-exciting but nonetheless relevant practical and green considerations. The intelligent home will control and can assist in reducing a building's power consumption, giving a property more financial and green appeal.

To impress potential purchasers during home viewings, temporary demonstrations can be programmed into a home control system to demonstrate first hand to buyers how the system looks, feels and sounds. In addition, property managers can offer enhanced service and support through online software solutions, such as the AMX HomeManager. Tenants are proactively notified of maintenance and security issues, and can instantly message their landlord for service.

No doubt, the key to wider adoption of home automation technology is the availability of more economical solutions. To support this, we have introduced a range of simple, cost-effective solutions which make home automation affordable to property developers and home owners, whatever their budget.

Vyomesh Patel, Managing Director, Zeos Infotech Limited

Due to the credit crunch, our business has suffered in sales and we are introducing new modular products for home automation and media distribution that are a lot cheaper. The benefit with the modular approach is that the property developer/seller/buyer can add a low-end system for home automation from GBP2500, and media distribution from GBP1750, and upgrade later, as and when the current or future resident prefers. We have also introduced an interest-free credit option as a method of payment to help customers to reduce the burden of their initial outlay.

Steve Calder, Director, USD Limited

As the market in house sales slows, we can all hold our heads in our hands and worry, or we can see it for the opportunity it really is. If they know how to, developers are keen to add value to their properties by including fully-fitted home automation systems, and I believe that we now have the perfect excuse to persuade developers of the benefits to their businesses. By working closer with us at an earlier stage, they can ensure that they are providing dream solutions that anyone would love to have in their house. This way, they benefit from selling more houses and apartments more quickly than their competitors.

There is also a growing awareness and demand for home automation in the wider market. Our big challenge right now is to make sure that developers understand what we have to offer - and just how great a benefit it is to them. This will, I am sure, lead to the wider adoption of the technology that is key to the ongoing success of our industry.

Johannes Rietschel, CEO, Barix AG

With energy costs sky-rocketing, the conditions are right for the home automation market to experience a lot of growth. Our challenge is to demonstrate how innovative solutions can save a lot of money by helping to conserve energy. During the good times, customers typically invest in whole-house audio systems, home theatres etc, but with times getting harder, people are more interested in solutions that optimise heating/cooling, smart lighting, automated shades and so on - systems that can actually pay for themselves within a short time.

Energy optimisation while maintaining comfort, is a billion-dollar business, and home automation solutions are available not only for new construction, but for retrofitting too. Our response has been to make products with low power consumption, high reliability, PC/server independence and built-in intelligence, so that they are ideally suited to IP-based, innovative solutions.

Ian Bruce, independent Residential Systems Consultant for Son et Lumiere Consultancy

I've always found clients at the very top end of the residential market aren't really affected by downturns or the credit crunch. Their spending is driven by what they would like to have, rather than limited by what they can afford, and when you have a GBP30m property, little things like money are rarely a problem - a very nice position to be in of course!

However, I do have clients who are reconsidering or postponing a planned move to a larger property in favour of remodelling or extending their existing property. This is an area where custom installers can benefit, not only by extending clients' existing systems, but by upgrading equipment and introducing clients to the benefits of new home automation and media distribution systems.

If designed well from the outset, and with expansion in mind, the new works could lead to further opportunities in retro-fitting the rest of the property. While this can be a challenge and wireless technology provides a possible solution to difficult locations, the industry should use a cable connection wherever possible.

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