The biggest challenge that faces today’s generation is arguably the housing market. Generation X and Y are saddled with student fee debt, overcrowding and a highly priced competitive market.
The property landscape has been traditionally viewed as a slow-moving and conservative industry. Whilst policy makers trade hymn sheets in aiming to provide affordable housing, there is one area of the property market that has not been fully utilised. Tech. Specifically, proptech.
The advancement of AI, IOT and other related buzzwords have been at the forefront of fintech revolutions over the past decade. However, there has been substantial less prominence given to the amalgamation of tech and property. In fact, investment in fintech is six times that of proptech, despite the fact that real estate contributes £94 billion to the UK’s economy*. So, what’s holding us back?
- I. Property developers are tech-less
The incentive for property developers to modernize is simply not there. The demand for housing in the UK is so high that the current business models simply work. In a market where demand is of abundance, it’s the sellers that define the rules of the game. There is little motive to pour millions in technology to transform the current establishment and engage with new processes that would allow the building of faster, cheaper and better quality accommodation. This means that the current system builds 150,000 homes a year, whereas the need is for 250,000.
Each housing project is tied with a web of stakeholders – developers, construction workers, planning authorities, councils, financial planners, architects etc. The amount of red tape involved in pushing through the applicability of advancements is tiresome. Developers are reluctant to add on new pieces of kit or software that would require abiding by additional regulation or that could not be deployed at scale.
Dealing with traditions
The industry is led by giants who do business the old-fashioned way. It is therefore difficult for a tech entrepreneur with a radically different business culture to shake-up the property development system. The tech and talent is available but proptech still needs to be better understood and promoted to the traditional players.
- II. A booming proptech industry
Despite these difficulties, an increasing number of entrepreneurs who understand the property market potential have launched disruptive innovations and transformed – beyond integrating smart building functionalities and clean technology – funding, building, selling/renting or managing property.
Funding property development.
Some UK start-ups are paving the way to make property development funding more accessible. For instance, LendInvest lends to property professionals, providing fast access to invest in secured property loans. They make it easier to get a loan, providing crucial funding to underserved borrowers or opening up property finance as an investable asset class.
Some companies such as Springfield and Caledonian manufacture prefabricated modular units in a factory off site before they are transported to the site in blocks and fixed to a structural frame, providing a real cost-effective option for young buyers. Prefab buildings further alleviate construction worker shortage, minimises air and noise pollution, increases efficiency and improves site safety.
Just as driverless cars promise to revolutionise the way in which we travel, autonomous vehicles such as bulldozers and excavators are being developed to enhance autonomous productivity on building site environments. Similarly, the successful application of robotics in the construction sector could actualise increased and more accurate outputs in many instances. Oxford-based Oxbotica has received significant government funding to realise this in deployment. In addition, exoskeletons provide builders with an ‘Iron Man-style’ wearable suit, to help lift heavy equipment and bring tools on-hand.
Until three or four years ago, 3D printing was uncommon in the construction industry. It is now being harnessed by tech firm Additive Manufacturing Technologies to be used by architects, engineering firms and interior designers to validate design for manufacturing and assembly, the feasibility of the design, enhance the effectiveness of construction and create replica models.
Some startups are looking at how commercial as well as residential property space can be utilised. Bringme installs app-connected boxes within a property vicinity, which allows residents to order products online and have them delivered directly in a box or send their post by putting them in the Bringme box without having to queue at the post office.
Proptech is acted as a catalyst for a more customer-focused approach to property and solutions are now deployed by estate agents to integrate virtual reality (VR), augmented reality (AR) and even drone technologies to offer an immersive viewing experience, especially when a buyer or property is overseas.
While Microsoft has teamed up with agent chain Ricacorp to launch Rica+, an AI-powered home searching platform that matches the right tenant with the right property, TheHouseShop provides a marketplace platform for renters/buyers where commissions on properties are being drastically cut. London-based startup Hubble has built successful business models on the back of short-term, more flexible and inclusive work spaces for sole traders and start-ups.
The immutable data set within the blockchain is able to provide some real added benefits for landlords. Title registration will bring in clearer land and property ownership, a faster conveyancing process, automation and transparency and fewer legal disputes. Time will tell, but the blockchain aims to add liquidity to the property market and will enable real estate transactions to be made simpler in a more transparent and less regulated system. Even with its hesitations, this is similar to crowdfunding in that it brings together individuals looking to share the ownership or funding of a property.
The digital online marketplace has set precedent for universal offerings supplied by the public, for the public. Just as Uber became the largest provider of taxi services without owning any vehicles, Airbnb has become the largest accommodation provider without owning any properties. So much so that it has provided the launchpad for WinwInnKeeper, a UK-based proptech start-up that manages the advertising of your property across platforms such as Airbnb, Booking.com, Expedia and TripAdvisor.
Further still, apps are available whereby an AI interactive service becomes a tenants’ personal concierge, which can record any maintenance issues or provide information on local restaurants. acasa is your new financial property consultant – managing bills and payments between housemates through its user-friendly app.
Proptech will lead the way
AI, big data, geolocation, IOT, VR, AR, drone technologies, apps, autonomous vehicles, 3D printing and blockchain are just some of the innovations reshaping the way real estate is built, occupied, managed, transacted and recorded.
An estimated $6bn in venture capital has been invested globally in proptech since 2011, of which 70pc was in the last two years. The global growth of proptech financing is on a steady increase with approximately 36pc year-on-year growth**. Technology will play a major role in the future – its influence is permeating just about every touch point of the industry.
As always, they’ll be winners and losers. The surge of proptech revolves around the collaboration on industry leaders and thousands of start-ups working together; all for a better market for younger generations. Real estate is poised for a ‘proptech boom’. Let’s embrace it.