Investment in Proptech is at an all-time high. From a humble $186m in the US market invested in 2011, to venture capitalists collectively investing figures in excess of $12bn last year. There can be no mistake that Proptech is the buzzword that’s disrupting the real estate market in ways never seen before. From the earliest stages of construction to the sale of homes, Proptech operates in every corner of our lives.
Except there’s one problem. Nobody seems to be able to define exactly what Proptech is. In a constantly evolving digital marketplace, the definition of Proptech remains elastic. At its core, it serves as an umbrella term for all technology related to property.
But on its own, that term is insufficient. For example, let’s take a look at smart speakers. The latest Nielsen research tells us that there are close to 120 million smart speakers in the US alone, with 52% of homeowners owning more than one device. Indeed, whilst many are partial to the services of Alexa, Google Home actually sold 600,000 more devices in 2018.
But is a smart speaker an example of Proptech? The answer is yes. It’s the technology which changes a person’s relationship with their home, and it’s examples like this which illustrate why Proptech is so difficult to define in concrete (pardon the pun) terms.
The Lifecycle of Property
In 2017, Proptech as a concept came to the attention of Professor Andrew Baum – Professor of Practice at the Saïd Business School of the University of Oxford. He set about casting a solid definition of what Proptech was:
“Proptech is one small part of a wider digital transformation of the property industry. It describes a movement driving a mentality change with the real estate industry and its consumers regarding technology driven innovation in the data assemble, transaction and design of buildings and cities.”
This would certainly appear to be a reasonable definition, but let’s look back to our example of Alexa. Using this model, any smart speaker or indeed, any smart device operating within the home would not fall under the definition of Proptech. Yet, are we seriously going to suggest that all of our smart devices should not be considered under this term?
The lens under which people have started to look at Proptech has caused them to focus on the lifecycle of property, from construction through to buying and selling, which can also incorporate renting and management of the property.
But Proptech also covers one other crucial part of that lifecycle – actually living in the property. The growing popularity of the Internet of Things means that our homes and offices are getting smarter, all thanks to Proptech.
So let’s take a look at each part of this lifecycle and how Proptech is changing the relationship that people have with property.
Building With Proptech
When looking at the relationship between Proptech and building, it’s important to recognise that the definition is not limited to residential property. It encompasses all building; from homes and offices to hospitals, schools, places of worship. In fact, when it comes to the construction of ‘smart’ buildings, the most enterprising nations are actually committed to the construction of smart cities, with the Asia Pacific region on track to boast ten smart cities by 2025.
The construction industry has been radically affected by Proptech – some simple, and some, truly revolutionary.
To take a simple idea, the management of a construction project has been dramatically sped up through Proptech. Project managers, architects and the end-user client are all able to work on cloud-based shared documents. Any changes to the project are instantly flagged up with every concerned party, which can often include building and safety inspectors too. This increase in the speed of communication cuts down unnecessary workloads, reduces costs and ultimately gets a completed building to market sooner. Just a simple example of how Proptech is improving the bottom line for both commercial and residential property construction firms.
At the more revolutionary level, construction firms now use special mapping robots on-site, and the use of drones, kitted out with specialist equipment, are able to carry out overhead safety inspections, relaying any issues to the builders in real-time – not only saving time and money but perhaps also saving lives.
The explosion of startups working to improve the construction industry serves as a very clear indication that Proptech is a truly global phenomenon, and investors are keen to get behind it. They recognise that continued innovation at this exponential rate will soon mean that demand will outweigh supply.
Buyers will want to live in smarter homes, work in smarter offices, and indeed even commute there on smarter roads. The infrastructure continues to evolve and the keyword is convenience, although others may say that it’s speed. Investment in property has always been regarded as a long and slow game, yet Proptech is starting to change all that, and it’s the investors getting in at the grassroots level with innovative startups, that are realising the greatest benefits.
Buying With Proptech
The change to our property buying process is a wonderful illustration of the disruptive power of Proptech and the radical changes it has brought to the real estate industry.
Consider how we went about buying a home some twenty years ago. We would see estate agents’ boards outside properties of interest, or we would see them advertised in the local paper. Rather than simply browse, it was necessary to register our details with every agent in the town which was of interest.
Then we’d have to sift through a mountain of property details, all neatly presented on two sides of A4, before calling the agent to arrange a viewing.
It sounds totally archaic to many people, and that’s because everything started to change in 2000 with the formation of Rightmove – the first of many online portals which would allow people to browse properties from the comfort of their desktop.
Since then, of course, many other portals have established themselves in the UK market. Zoopla and PrimeLocation join Rightmove as the portals of choice for most high street estate agents. From the buyer’s perspective, the process of searching for the right home is quicker and, on the whole, a lot more convenient, and this is Proptech at its most basic level – the use of technology to transform the real estate industry.
And naturally, a change to the way people buy also has a direct correlation to the way in which people sell. Check out our piece on Meridio to see a potentially game-changing platform for buying and selling property.
Selling With Proptech
Let’s wind back the clock once again to a time before Zoopla – which, interestingly enough is actually just a little over ten years ago – 2008.
Before putting one’s home on the market, homeowners would call in their local estate agents to provide a valuation. The science of valuation was really not all that complicated, and indeed has not really changed since those days either. The agent would consider comparable properties in the same area – ideally in the same street – look at what they sold for and how long ago that was. If the market was steady and showing signs of improvement, it would be suggested that the owners put their property on the market for slightly higher, just to test the waters.
Conversely, if there was a decline in market confidence, the estate agents would suggest either a matching or perhaps even lower starting figure in order to generate interest.
Thereafter, homeowners would typically ask two or three additional agents to provide a similar appraisal.
Now, all of that has changed. Homeowners can ascertain the appraised value of their homes from their smartphone using the Zoopla app. Their database holds the original sales price of the property, comparable homes and market analysis to provide a valuation in under a minute. And after that, it’s no longer necessary to return to the traditional high street agent any more.
Advertising on all of the major property portals – all of which are Proptech – means that homeowners can utilise the services of independent estate agents who operate purely online and have no high street presence at all. This means that they are in a position to offer their services at substantially lower rates than their high street counterparts.
Indeed, many homeowners now choose to take care of the entire sales process themselves, using agency services like Purple Bricks who charge an upfront fee, rather than a high commission figure at the end.
This is Proptech at its disruptive best, as twenty years ago, the thought of paying an estate agent before the property had even been sold was inconceivable.
Is Blockchain part of Proptech?
In countries like Australia and Canada, the new model of fractional ownership means that blockchain has become very much a part of the Proptech revolution.
Using blockchain and smart contractors, investors can enter the real estate market for as little as $100. Both commercial and residential properties are managed as funds. The property’s value is divided up into equal shares and investors can purchase as many or as few as they wish.
Unlike traditional property transactions, the whole thing can be done with a smartphone in just a few clicks. Blockchain technology means that investors can return their shares to the open market at any time. There are no legal fees, advertising costs or estate agent’s fees – the whole process is as simple as buying stocks and shares, because thanks to Proptech and blockchain, that’s exactly what investors are doing.
Once again, a fantastic example of how Proptech is disrupting the real estate marketplace as we know it – making real estate investment available to everyone and removing the traditional barriers to entry.
Fractional ownership is a new concept that is gaining some serious traction in its home territories, but it is only a matter of time before companies around the world see its true potential and thus transform the real estate investment market on a global scale.
Millennials, in particular, are getting smarter with their money – recognising that whilst a savings account may be a safe option, that it’s not really making their money work for them. The concept of trading in stocks and shares in homes is new and exciting. No brokers are required – the advice that investors need is built into the system, as providers of fractional ownership schemes have done the homework for them, selecting properties which they feel are likely to offer the greatest return on their investment.
A Change in Mentality
So now we have an understanding of what Proptech is, can we really think of it as being ‘disruptive’? The word disruptive, in and of itself, has also started to see some elasticity in its definition.
At its core, for something to be truly disruptive, it has to change the way people think. It has to change that thinking in such a way that the majority of people didn’t even notice that it was happening.
Disruption on a global scale does not require millions of people to have an epiphany. No. It simply means that enough people start to do things differently and, at some point, this different way becomes the new normal.
People in their 40s or more can actually remember a time when sending a document to someone in the next town could take a couple of days. Now, we think nothing of sharing that same document with someone on the other side of the world in seconds.
Our relationship with property has changed. Let’s look at something as simple as the light bulb. The first LED lightbulb was actually invented in 1962, and yet homes throughout the world have worked their way from traditional filament bulbs to fluorescent tubes, then onto halogen spotlights and now LED bulbs.
In the UK, halogen light bulbs were banned on September 1st2018. The aim is to reduce the country’s carbon footprint. Consumers are aware though, that whilst LED lightbulbs can be more expensive at the outset, that they use 10% of the electricity of their predecessor and will also last a lot longer.
Within ten years, no one will even remember what came before LED lights, and THAT, at its most basic form, is the very definition of Proptech – Technology that brings about a shift in the mentality of people and their relationship with property.
