PropTech will change the way real estate markets operate. But it might look different to what everyone thinks. So why is PropTech important?
When people talk about PropTech they almost always compare it to FinTech. FinTech has changed financial services forever. Financial transactions are now faster, safer, and cheaper as a result of FinTech. Most people interact with some type of FinTech product daily. FinTech development and adoption has been stratospheric.
But FinTech development is not a good benchmark for PropTech. Particularly in the consumer market. That’s because of the frequency of transactions. Most people use financial services every day. Whereas the average person moves home 11.4 times in their life. So, why is PropTech important if it’s not used like FinTech?
For PropTech to get mainstream acceptance it will need to develop products for high frequency users. As PropTech becomes part of their everyday use, it will filter down to less frequent users.
Where is PropTech used today?
PropTech’s exist that are part of everyday use, but people don’t see them as PropTech’s. For example, most residential searches start in a portal rather than agent direct. Airbnb has changed how the travel accommodation industry operates. WeWork has changed the way office accommodation is used around the world.
But these are all on the boundaries of what is possible. So far there hasn’t been a product that changes “real estate”.
The striking thing about PropTech is that there are lots of very clever people working in the sector. But few with direct industry experience.
The problem with real estate is people think they understand it because they use it. But they understand what to do with it. They don’t understand how it is created or the reality of transacting it.
As a consequence many PropTech startups have built technology which:
- Answers a problem that doesn’t exist
- Answers part of a problem but does not appreciate how that problem relates to other pinch points. Because of this it is hard to integrate to existing workflows
- Does not have a broad enough use case – just because they had a problem with it doesn’t make it a common problem
The problem with PropTech
There is one main problem with PropTech. There aren’t enough experienced real estate professionals working in PropTech transferring knowledge.
Why is PropTech important – Commercial Real Estate
Large real estate firms and corporates with large footprints are going to adopt PropTech applications. Legacy technology and a lack of know how will mean that integration will be clunky and expensive. But the opportunity to reduce headcount and save costs will be too big an incentive not to do it.
PropTech, automation and AI will mean these companies will be able to do more with less. The role of commercial real estate executive will be about how to use digital tools. These tools will eliminate administrative functions. And predictive analysis and AI will help with research and analysis.
The role of a commercial executive will be to review outputs and make decisions and recommendations based on the outputs. But the main consequence will be that nowhere near as many people will be required to do the work. Expanding market share is tough in the commercial space. So most companies will simply do the same with lower headcounts.
Why is PropTech important – Residential Real Estate
There is far more opportunity for there to be truly game changing movement in the residential space. It seems to me there are two obvious things which will change.
New Build Housing
Most people believe that the housing crisis is specific to wherever they live. The reality is there are not many cities around the world which don’t have housing issues. People believe that more supply is the answer, it is but only to an extent. More supply delivered in the same way won’t reduce the cost of housing. Because new build property is about cost not price.
There are 5 basic functions which dictate the cost of new property, land prices, the cost of getting consent, building, sales and marketing and finance. The difference between the cost and sale price is the developer’s profit. Profit is a function of risk and the more capital at risk the higher the profit expectation.
Game changing PropTech will address the friction points in the housing market. By reducing cost, risk is reduced, and the price expectations of the developer will reduce.
The role of an Estate Agent
Residential real estate will always be a people business. But the future of a real estate agent will be intertwined heavily with tech. How far buyers go from the current reality to a full digital purchase will depend on how comfortable people ultimately get with a full digital purchase. Five years ago most people would not have expected that most consumers would now buy a car on the internet without a test drive. So anything is possible.
Things which are important in PropTech and definitely going to change area:
- Predictive analytics and machine learning algorithms will help agents with pricing and marketing strategies.
- Augmented reality will allow agents to give clients virtual tours of properties, reducing the need for in-person viewings
- AI powered chatbots and virtual assistants will be able handle initial client inquiries and schedule viewings, freeing up agents to focus on more high-level tasks.
- AI like Jasper and ChatGPT will prepare marketing campaigns and campaign content
PropTech is important because, the best applications can help people save money. They reduce waste (physical and financial). And they can help drive better investment decisions.
Du Val Global
Du Val Global is a great example of how why PropTech is important.
Our real estate investment software helps investors make better decisions. Good decisions are not possible without complete information. Du Val Global has the tools required for success.
- Our property data software allows investors to research markets in real-time. Users can see local market incomes, rents, and property values.
- Our property analysis tool allows investors to build sophisticate financial models in seconds. Making like for like property comparison on an after-tax basis possible. Users can even compare properties in different countries.
- Du Val Dynamic Pricing™ creates economies of scale for small investors. We sell property from the world’s leading developers at discounts up to 15%.
- Our property portfolio planning tool helps investors create long-term wealth. Effective monitoring, management, and benchmarking is critical to long-term portfolio performance.
Interested in giving our platform a go? Start your free trial today at Du Val Global.
Check out our other articles about proptech, here.