There has been massive resistance within sectors of the property industry to the emerging technologies designed specifically for this industry. But resisting change is no longer an option; property technology, or #PropTech, is revolutionising the marketplace. This is happening.
Property is not only one of the largest industries in the world, it is also one of the longest established; the opportunities for innovation are huge. These opportunities arise for many reasons but principally because the sector did not keep pace with the changing world over the past decade. In many parts of the world, we are not building the type of property that we know people want; nor are we delivering housing in a way that people want to receive it. In much the same way as the internet and the rise of online sales websites like E-Bay and Amazon have changed how consumers buy, the property industry must respond to today’s consumer.
Over the past fifteen years, property has been made available to consumers via online portals like Daft.ie, for example, and this is what would-be buyers wanted. But this is no longer enough.
Buyers and sellers have now advanced to the point where the property portal offering does not go far enough. We can bank online, we can view perspective neighbourhoods online, but we cannot conduct house/apartment viewings online in Ireland yet. This is a source of much frustration to remote buyers who might know the neighbourhood and even the building but cannot access more than a few staged photos or badly produced estate agent videos online. Furthermore, even if they are happy to put in an offer, most estate agents will not accept it until the buyer or someone on their behalf physically walks through the property in question. This adds unnecessary expense to buyers not living nearby or in the country. Along the same vein, even if a proxy is sent along to view, the offer process takes the parties off-line again as ‘for sale’ advertisements do not list current offers, these will only be given over the phone or by email.
The reality is that technology already exists to facilitate the entire transaction of property online and this terrifies professionals working in this area.
Without getting into the issue of credibility around the offer process in Ireland at the moment, this practice is entirely inefficient and flies in the face of how the millennial generation lives. We live in a world where everything we need can be sourced online and purchased by the click of a button. Everything, that is, except property. The reality is that technology already exists to facilitate the entire transaction of property online, including digital signatures for legal contracts, and this terrifies professionals working in this area. They are using their resources fighting progress instead of becoming part of it. There has been massive resistance within sectors of the property industry to the emerging technologies designed specifically for this industry. But resisting change is no longer an option; property technology, or #PropTech, is revolutionising the marketplace. This is happening.
A simple assessment of the situation tells us that estate agents and property providers have completely failed to keep pace with this current generation of renters and buyers; buy we are entering a fascinating era of virtual reality(VR) and augmented reality (AR) that is likely to make 3D modelling and – the traditional showhouse model – sales relics of the past.
The integration of technology into our everyday lives over the past two decades has been eye-wateringly prolific. This may have started as a form of gaming or entertainment but there can be no doubt, technology as a way of life has come of age. The single greatest achievement of technology has been to gain consumers trust. We now trust technology more than human interaction; data is more valuable than opinion.
It’s quite remarkable that so little changed followed a decade of boom, bust, false recoveries and then rapid recovery in the marketplace. Despite every part of the process breaking down, no players within the industry stepped forward to cause the disruption truly needed. Even new ‘innovative’ entrants to the market fell into line with the old, established rules.
Although maybe that shouldn’t be so surprising; lessons learned from other industries tell us that real and meaningful change is generally not-industry lead but rather, it is consumer-driven. When consumers feel pain, they set about making change. The problem with property is that, for the majority, this is such an infrequent transaction that consumers have shown themselves willing to put up with poor processes, inefficient deliver and ineffective service. We can see, therefore, that change is need not only in the merging of the business model with technology, but of buyer behaviour. Of course, the frequency of transactions explains why the PropTech movement has been dominated by services associated with the rental sector.
What exactly is PropTech?
To be clear, the term PropTech refers to a property business, not a technology business. It involves the use of property industry-specific technology to offer consumers a better, faster, more personal and more interconnected service when they are engaging with the industry.
The technology should set about solving existing problems in the market. This explains why development is primarily consumer rather than industry-driven. In practice, the industry is still working from the same understanding of the customer that we had more than a decade ago. Meaningful innovation must be based on what this current generation of renters and buyers actually want. And it is not just about current need, this new sector will need to pre-empt future needs. This is where technology savants need to reach out to seasoned property pros, or vice versa; there must be an understanding of the current system before it came be broken apart so that the vital elements are retained. Think of this like stripping down an old car for the parts; if you don’t know what you are looking at, you might not know what to keep and what to discard.
The property market in Ireland is primed and ready for genuine disruption. The possibilities are endless. Innovation is needed in the way we find, view, negotiate and bid on properties. This applies equally to the sales and rental market. Following on from this, innovation is required to take the legal side of the process online.
This was discussed recently at Future: Property Tech, a PropTech event hosted by Google. The general consensus was that PropTech need not herald the end of the traditional estate agent. Buying a home is such an infrequent and costly event, consumers do want to engage with a real person, but this person can no longer act as gatekeeper of the market; they must reposition themselves as value-adding facilitators.
In Europe, London is establishing itself as the heart of the PropTech movement. The London market, in particular, is exploding; there is a severe housing crisis; demand for rental is insatiable. Simply put, property development is not keeping pace and consumers are particularly unhappy estates agents and landlords. There is a sense that these agents and landlords have failed to embrace available technology or to use it well for the benefit of consumers.
London-based PropTech start-up Real Funds is focused on providing alternative finance to small and medium-sized house builders through a combination of crowd financing and technology. Founder and CEO Arya Taware – real estate peer-to-peer lending platform disrupting the oligopolistic position of a few major house builders by providing alternative finance to small and medium-sized house builders, who currently have limited access to finance, especially after 2008 banking crisis.
“We are opening this exclusive market, which was previously available only to those with high capital and the right connections. Through our platform, you can invest in property development projects in your local community and beyond for as little as £10, for returns of up to 10-12% per annum. Our ultimate vision for the future is where cities will be financially self-sustainable, with local communities investing in local property developments.
By funding small and medium-sized house builders through crowd funding, we provide them capital they would otherwise not have access to. This will enable them to build more and the right kind of housing. The government has established a target of building 240,000 houses each year. Housing experts believe such figures cannot be met at this point. We believe actually it can but only if new innovative development models – such as the one Real Funds proposes – are promoted.”
James Townsend, co-founder of Kontor and PropTech pioneer recently described PropTech as the silver lining of Brexit:
Although Brexit may have the property industry feeling as though it is hanging over a knife edge, it could prove to be the making of the PropTech movement.
While the whole sector waits for the effects of the UK’s decision to really hit the market, in reality now is the best time for intelligent firms to recognise the huge wave of technology that is starting to engulf the industry. Citing Brexit as a reason to keep a business in limbo risks a business missing out on the – now vital – efficiencies that many PropTech companies can offer.
In short, if Brexit does prompt the industry to cut costs and become more efficient, everything that PropTech offers will become even more desirable. There are start-ups developing tech that will streamline each bit of the mechanics that make a deal happen, from tools that harness data to simplify how we find office space, to virtual reality that could replace traditional viewings and software aimed at easing the process of taking a lease.”