Revolutions and Evolutions: Where is PropTech Taking Us?
In the year 2000, four of the top corporate estate agencies created a website. 6 years later, it floated on the London Stock Exchange at £3.35 a share and now trades at 4,117.00 GBp.*
What drove this site towards such success? It solved a problem you didn’t realise you had. In 2009, the site hosted 1 million visits in a single day. In 2012, the site was ranked as the 6th most popular site in the UK, with revenues exceeding £100m.
House-hunting was manual, time-consuming, and inefficient. Rightmove, a platform which fits under the umbrella term of PropTech, revolutionised that.
PropTech can be viewed as the point at which sophisticated simplicity meets the world’s largest and most valuable asset class.
*Data taken on the 4th September 2017
The historical origins of PropTech
Generally speaking, change is closer to a network of roots than it is to a single seed. And so, as with many marketplace shifts, identifying (and agreeing upon) a single birthplace might be difficult.
Some thought leaders argue that online property search sites, such as Rightmove, were the first bloom of PropTech.
Yet others disagree. In his research paper, PropTech 3.0: The future of real estate, Professor Andrew Baum traces the origin back further. He argues that PropTech took root in the mid-1980’s due to “data and computing power.”
Amongst other things, Baum attributes the start of PropTech to the introduction of the personal computer. Alongside Excel, this fed a hunger for data-led real estate operations.
In 1982 for example, Property Market Analysis (PMA) was founded in London to “develop and sell the outputs of PC-driven property research.”
Evolving out of failure
The traditional systems upholding property as an asset class have been labelled as “broken and backwards.” The industry presented a space for change, with technology offering to bring “transparency and efficiency” to the market as a whole.
As Professor Baum notes, the space for change is driven by “industry practices plagued by inefficient processes and unnecessary transactional costs.”
In a podcast featured on PropTech Consult, Professor Baum attributes the sector’s growth to market failure.
He explained, “Smart building technology is a response to market failure in terms of sustainable building’s energy use.” Likewise, real estate FinTech, such as property crowdfunding, is a response to market failure considering how difficult it is to buy and sell property.
As such, one could argue the PropTech revolution was necessary, and it evolved out of failure.
Slow to adapt
Despite its potential, some believe that the property industry has been “slower than others to welcome technologically innovative solutions.”
Co-founder and managing partner of Pi Labs, Dominic Wilson, supports this in saying, “The real estate industry is a very rich one,” yet it “has been the slowest to disrupt and change.”
Growth so far
Despite this reported slow start, the sector has seen monumental growth. Within this, traditional inefficiencies have been pulled apart, and reassembled to fit the needs of the consumer.
For example,
- Property Moose offer instant, debt-free, online property investments from just £10, as opposed to £55,178*
- LendInvest provide “expertly-underwritten loan decisions within days,” as opposed to months
- Purplebricks offer an online-estate agency, charging flat rates to help consumers save money
*Assuming a buy to let mortgage requires 25% of a property’s price, when average house prices are £220,713 (UK House Price Index - May 2017)
Measuring growth
According to CB Insights, private real estate tech startups raised $2.6 billion in 2016 alone. Real estate tech companies have also increased funding by 40%. CB Insights clarify that this category includes:
“The software tools and platforms used by different participants in the real estate industry, including brokers, investors, real estate-focused lenders, property owners, and managers, as well as buyers. The category includes online real estate rental and buying guides.”
Where is PropTech taking us?
Arguably, the sector is too vast to pin down to a single-destination journey. And perhaps, more importantly, it would be unwise to view PropTech as a means to an end.
To gain some perspective, however, we can remind ourselves of where it began: with a desire to disrupt slow, antiquated systems within real estate.
Despite comprising of multiple subdivisions, this appears to be a collective intention shared across the board.
We believe that PropTech is geared towards streamlining the property sector for the consumer, through the power of technology. It is a movement where every step taken is a conscious decision to evolve and revolutionise property.
Predictions, trends and insights
- “New technologies will either improve or replace most value propositions that have long been the status quo in the real estate market.” - William Blair, 2015
- “We can expect to see more powerful analytics and predictive decision-making tools, decreased transactional friction and increased resource optimization, which may mean fewer office jobs and/or a radical change in the front office/back office relationship.” - Andrew Baum, 2017
- “We’re in the midst of a generational shift within property…This whole PropTech movement and what I talk about as the wider digital transformation within property, [is] not an overnight thing.” - James Dearsely, 2017
- “We’re moving towards preserving the human element, which is of high value, and to automate the clerical aspect.” - Dominic Wilson, 2016
- “Large operators are cottoning on to role of start ups, and we will be seeing more incubating, acquiring, and funding as a result.” - Ishaan Malhi, 2016
- “The industry’s current activity is just the tip of the iceberg. The momentum of growth we have seen, combined with a global readiness for change, is a testament to the sector’s future potential.” - Andrew Gardiner, 2017
The importance of the consumer
In a similar vein to FinTech, the consumer ought to be placed in the heart of PropTech’s growth. As Andrew Baum explained, “The people who observe what people need will have a better chance of succeeding.”
It is for this reason that the question, “Where is PropTech going” is less telling than “Where is PropTech taking us.” The key to success, in our opinion, is ensuring the consumer remains an integral part of PropTech’s growth.
By Jenna Kamal
Disclaimer and Legals
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