Smart Homes - Is it where the Smart Money will be?December 2019

With technological progress having a transformative impact on consumers’ lives, the smart home market is gathering pace, supported by keen interest from end-users, energy providers and manufacturers of HVAC and control products.

BSRIA has been analysing the global progress of this market since its early days. Until recently, while growing rapidly, the market still occupied a niche, even in the most developed countries such as the USA, Germany and indeed the UK. However, the most recent BSRIA research of the smart homes market suggested that the value of the UK smart homes market, including installation, service and maintenance would exceed £400 million in 2019, more than three times its value just five years ago. 

This reflects a big change in people’s expectations and behaviour observed at a global level. BSRIA forecasts that by 2030, i.e. barely a decade from now, there will be almost 300 million homes worldwide with at least four smart systems, where a system is taken to mean one controlling a key function such as lighting, security, energy management or HVAC.

More smart devices than people by 2030

Bearing in mind that there are roughly two billion households worldwide, then, even allowing for continued growth in households, that means that about 10% of all homes in the world are predicted to have a significant smart element. What is more, each “smart home” is likely to have an average of more than 40 smart devices, which equates to more than 10 billion smart devices worldwide, more than one for each person alive.

So what is driving this potentially revolutionary change?

Smartphones have been among the most significant enablers of the change. They have in effect conquered the world more quickly and completely than almost any other invention. In 2009 150 million smartphones were shipped worldwide. By 2018 3.3 billion people had a smartphone, approaching half the world’s population

With about a quarter of the world’s population now having a smartphone – and an even higher proportion of adults - a whole new world of possibilities is opening, including access to a vast and growing array of mobile apps. The smartphone has become a familiar device which can be used to control everything from lighting to a smart home security system. People who trust a phone app to manage their bank account are increasingly happy to use it to interact with their home.

Smart appliances “hype”

In terms of smart home applications, the biggest growth, both quantitatively and in percentage terms, is likely to be in smart appliances. In our earlier studies, BSRIA found that smart appliances, while much talked about, had yet to live up to the “hype”. There were arguably three main reasons for this.

The first was that smart appliances, such as cookers, washing machines or vacuum cleaners, were often not effectively integrated into a wider smart home. This is exemplified by the paradox that even manufacturers offering both smart appliances and smart building solutions often did not promote them in a coordinated way.

The second was that the value of some of the most obvious smart appliances, such as smart washing machines, depended on their being able to time-shift to take advantage of cheaper off-peak tariffs. That effectively required a smart meter. Progress in the installation of smart meters has been slowed by both logistical factors and security concerns.

However, the final barrier to smart appliances was possibly the most telling: the fact that a lot of the early ones were not really that useful, or at least not useful enough to justify the investment. Dishwashers that can automatically re-order tablets are addressing a problem that probably doesn’t feature in most people’s top 500 burning worries, and yet they were trumpeted at shows in a way one might expect a cure for a deadly disease to be greeted.

Smart home markets will develop worldwide

The spread of smart homes to many parts of the world yet barely touched will accelerate the market uptake. As of 2019, BSRIA estimates that over 90% of smart homes are in just six countries: The USA, China, Japan, Germany, the UK and Italy (more if you include France).

The US alone accounts for over half the current market. Two big waves of expansion are set to challenge this. By 2025 China will probably be a bigger market than the US, reflecting the forecast that China, already the world’s “biggest economy” when purchasing power is factored in, is likely to become the biggest in absolute terms very soon. The next big wave will be felt in the late 2020s, as the rest of the world starts to move towards smart homes, so that its share of the market, still small today, will by 2030 account for approaching half the total.

Ageing population supports the growth of the market

The fact that the population is ageing in almost all developed economies will also affect the smart homes market. In BSRIA’s recent in-depth study of smart homes, “assisted living” solutions were found to account for 1%-2% of the market at most. And yet smart technology has a huge role to play in helping elderly people stay in their own homes for longer, whether it is monitoring their health, helping them run their home or even in providing “companionship”.

Understanding users’ behaviour and desires will be key

With such a huge and rapidly growing market, it is no surprise that global technology giants, including Apple, Amazon, Google and Samsung are increasingly taking an interest in smart homes. Companies whose focus has hitherto been data, see smart homes as an attractive field of play. The successful smart home of the future will be as much as anything about understanding the behaviour and desires of home users and providing attractive solutions, which means exploiting as much information as they can get their hands on both about general behaviour and about the quirks of individual owners.

Privacy and the Market

Of course, in this context, big questions about privacy are raised. So far, consumers have proven quite savvy in negotiating the trade-off between sharing their personal data and getting the services that they want, often at a reduced price or for free. How far this will extend into the ultimate privacy of the home remains to be seen and will probably be influenced by factors such as local culture and legal safeguards.

In countries like the UK, anyone connected with the residential housing market needs to be aware of the implications of the smart home revolution. Consumers may not necessarily be expecting a fully fitted out and configured smart home, but they are likely to want a home that is flexible enough for them to make it as smart as they want it to be without undue cost or effort.

In other words, if you want to be smart, then you need to be on top of smart homes.