The rapidly developing digital technologies, steadily penetrating into all spheres of our life, have not bypassed the real estate market, where the term PropTech is increasingly mentioned.
PropTech (from the English. Property Technologies technologies in real estate) is a multifaceted phenomenon. It combines all modern innovative technologies and applied solutions in the field of real estate creation and management (real estate transactions, investment analysis, construction and design, development, real estate maintenance, etc.).
Startups in the field of PropTech are developing in two main directions: they offer tools that can help real estate professionals improve their services or increase productivity, or they are trying to replace professionals.
So what does PropTech carry with it and what effect can it have on one of the most seemingly stable markets?
PropTech – a new trend in the real estate market SergeyNivens /
How do PropTech meet on the real estate market?
Let us turn to numbers. The results of a KPMG survey conducted in the summer of 2018 among the leading real estate players showed the following: 97% of respondents believe that digital and technological innovations will affect their business in any case, while 60% are convinced that this will have a significant impact. 78% of respondents noted that such influence has already increased in the past 12 months.
The majority of survey participants (73%) evaluate PropTech positively, considering this trend as a new opportunity for the development of their business, but 25% see it as a kind of threat. Recognizing the inevitability of innovation and their overall positive direction, 56% of respondents admit that they cannot yet speak of the “digital maturity” of their companies. Only 7% of respondents are convinced that in this area are at the forefront.
30% of survey participants indicated that they are already investing or planning to invest in PropTech start-ups, while 66% indicated that they still have no clear idea about the prospects for using digital and technological innovations or the corresponding strategies.
It is interesting how the perception of the survey participants about what exactly PropTech’s achievements will influence the activities of their companies and the real estate market as a whole has changed over the year. So, the majority of survey participants of KPMG 2017 (53%) suggested that in the next three years their companies would most likely use PropTech innovations in the field of “big data” (from English Big Data – structured and unstructured data, which differ in outstanding volumes and processed by certain software tools) and analytics.
Talking about what trends PropTech in the next five years will have the greatest impact on the property market as a whole, 44% respondentova also highlighted big data, 16% said things Internet capabilities (from Eng. Of Internet of Things, the IoT – unified network-related facilities among themselves through the Internet, capable of collecting data and sharing them. Such objects may include household appliances, cars, etc.), and 15% – the development of artificial intelligence.
Many participants in the real estate market do not yet have a clear idea about the prospects for the use of digital and technological innovations, nor the corresponding strategies of ra2studio / Depositphotos
The 2018 survey showed that in the short term, respondents expect automation to have a greater impact on the real estate market as a whole and on their own companies (30 and 31%, respectively). In second place (in 27% in both cases) were “big data”. Third place was shared by artificial intelligence and the Internet of things. In the long term, the greatest impact is expected from artificial intelligence technologies (32 and 28%).
We note that real estate market players do not yet see the really serious potential of such innovations as blockchain, autonomous vehicles (including drones or self-driving machines), 3D printing technology, virtual or augmented reality, 5G.
Are investors ready to support PropTech?
Statistics show that in solving the problem of investing PropTech projects, 2017 was a turning point. Starting in 2016, start-ups in this area began to receive tangible support from venture capital funds. For example, in the United Statesalone , the volume of relevant investments increased from 44.7 million dollars in 2012 to 6.5 billion dollars in 2017.
Market research conducted by RE: Tech showed that in 2017 funds invested about $ 12.6 billion in PropTech, thus supporting 347 transactions. The global investment in this area of the market increased by 92%. In 2018, this trend continued.
Thanks to innovative technologies, large investors also appreciated the new opportunities offered to the real estate market: it was SoftBank that repeatedly invested in PropTech; Amazon has invested in a modular housing company; Sequoia Capital supported AirWnb and WeWork’s.
Experts point out that investors already interested in the real estate market, using technologies rather than technology companies, are ready to offer new solutions and products for this area to attract more interest from investors.
What changes bring new technologies to the real estate market?
Despite the fact that the real estate market is traditionally quite conservative, many experts agree: in the coming years, due to the growing demand for innovation, it will inevitably change beyond recognition. Many projects are aimed at helping the buyer to find his dream home without the participation of intermediaries or to organize a happy meeting of the landlord and tenant.
As shown by a survey conducted by HSBC analysts, 37% of respondents – real estate buyers felt uncomfortable (under stress) during forced communication with many people involved in a deal (real estate agents, lawyers, salespeople, etc.). 29% of respondents considered the negotiations on the price too exhausting, 28% considered the resolution of tax issues, and 24% considered drawing up the necessary legal documents.
The number of transactions concluded without prior visits to the property is increasing alexroz / Depositphotos
Modern technologies and online platforms will provide users with the opportunity to make transactions independently. Acquisition and sale of real estate will be greatly simplified. Today, among the most famous PropTech startups that have taken on the functions of realtors, one can single out American Redfin, Zillow, OpenDoor, Trulia. In the UK, Tepilo service is gaining popularity, in China – Homelink. In their work, companies use big data analysis, which allows them to form proposals that match the client’s requests.
The development of such projects will affect the work of real estate agents, who are likely to become only consultants and / or providers of technology platforms.
According to HSBC research, most consumers are not yet ready to trust chat botsor robot consultants in matters of mortgage lending (only 11% of respondents would decide to do this). Experts believe that this, in turn, leaves room for technological solutions that allow receiving remote consultations through online chat rooms or video chat. In addition, the quality of service provided by chat bots is rapidly increasing, and their flaws are becoming less and less obvious.
Using data analytics and artificial intelligence, property owners will be able to get comprehensive information about the demand for certain objects, as well as forecasts and recommendations. This is exactly how the startup Skyline AI, which offers investment advisor services, operates. The program independently determines the most profitable assets for investments, tells you when it is better to carry out a major overhaul or increase the rent.
The development of virtual reality technologies (VR), through which preliminary inspection of real estate assets can be carried out remotely, will be able to seriously affect the processes of acquiring real estate (especially foreign). Virtual reality makes it possible to thoroughly examine the preliminary planning and design of the premises before the repair works are carried out, and if necessary, make adjustments.
The use of VR-technology allows you to conduct virtual tours of buildings, and you can inspect the object both from a computer monitor in 2D-format, and using special VR-glasses in 3D mode. In addition, the client is usually provided with detailed panoramic photos and the ability to monitor the object (including those under construction) in real time via webcams with a 360 ° view. One of the recognized leaders in the creation of VR are EyeSpy360 (UK) and Matterport (USA).
In a survey conducted by the online broker Redfin (USA) in 2017, 33% of respondents said they made a decision to buy a house without actually visiting the facility, taking advantage of the opportunities provided by digital technology (in 2016 only 19% of respondents acted that way) .
The influence of PropTech is not limited to interfering in the process of making sales and rental transactions. Modern technology allows you to automate the management of real estate. Such programs help, for example, track the terms of lease agreements, manage bills, keep track of property, pay taxes, place objects for rent on ad sites, and monitor income and expenses. Today, the field of property management confidently conquers SMS Assist.
PropTech services offering solutions based on the Internet of things and artificial intelligence help minimize the costs associated with servicing real estate – help control energy consumption, timely detect faults and equipment defects, etc.
For example, an enertiv startup from New York promises its customers up to 5% savings in operating costs due to solutions based on machine learning, big data and IoT. The company provides buildings with various sensors that continuously transmit information about its condition. In this case, the system itself determines the malfunction, or detects equipment that is on the verge of failure and informs about it. In addition, the system allows landlords to track the occupancy of objects in real time.
Many PropTech companies work by combining several technology solutions. For example, Opendoor acquires real estate through the Internet, directly from homeowners, at a price set by an algorithm based on Big Data. Having improved housing, they bring it back to the market. Using big data, the Internet of things, digitalization, the company greatly simplifies the purchase process – electronic locks installed in buildings and premises allow real estate viewing at any time convenient for the buyer, without an appointment. It is not necessary in the presence of an agent. The lock code can be obtained through a special application.
The impact of PropTech on the real estate market will inevitably grow under the influence of the demand for innovation. Buying a residential or commercial facility anywhere in the world will be as easy as buying securities, and virtual assistants will manage the facilities.
The success of traditional market players will soon depend on how quickly they can adapt to the changes taking place.
Material prepared for PropTechRussia.com