Proptech allows greater ease of use, more transparency, faster completion at every stage of the building and buying process, cloud storage and best of all, you don’t even need to be physically present to buy, rent or furnish a property.
Text by Jan Yong
A condo unit displayed on a property portal on your mobile has just caught your fancy. You check out its interior on the portal’s virtual reality platform which allows you to walk to every room and interact as if you are inside the showroom itself. You can even experience the neighbourhood in VR. You are satisfied and decide to buy this unit.
You check out its availability through real time updates on the portal and then zero in on your preferred unit – the portal shows all the details, for example, the 3D floor plan, sizes, location, etc.
With a few clicks, you book your unit and pay online. You key in some personal details and your preferred loan tenure and amount. The next day, a few bankers call you offering loans. You decide on one and the very next day, your Sale & Purchase Agreement and Loan Agreement are ready to be signed. But you don’t have to be physically present to sign – your electronic signature is sufficient. You sign online and the following day, you get all your agreements back online, signed and stamped electronically. You have just bought a property and completed all transactions within 48 hours.
Now, you just need to wait for the property to be completed. What used to take an average of 2 or 3 years is now reduced to one third or half the time due to advances in construction technology, design, building materials, fixtures, fittings and systems.
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1,2,3,4,5,9″ ihc_mb_template=”1″ ]
When your unit is ready, you search online for an app that displays all the services you need when moving in or renting out your unit. You can easily engage online a defects inspector to do inspection for you or a cleaner, etc. Next, you log into another app and choose an interior design from some 2,000 templates available or you can customise one yourself. You can complete the task by buying all the furniture, fittings and furnishings online via the same or different app. Within a few days, your interior designer can renovate and furnish your unit to a move-in condition.
If you decide to rent out, it’s even easier. There are a number of management firms out there which you can engage online to handle all the management matters for you such as looking for tenants, signing the tenancy agreement, managing tenants, etc.
In less than 2 years, you have successfully bought a brand new condo unit and rented it out with minimum effort and time on your part. You can retrieve all the information at any time with a few clicks on your mobile phone because everything is stored on cloud. Further, with another app, you can find out how much you still owe the bank in a fluctuating interest rate situation or the value of your property in real time. But the best part is you don’t even need to be there at all. You can buy a property in Malaysia while holidaying in Australia.
This can all be done even today or in the next few months. A portal recently reported that Chinese Millennials are already buying overseas property via their smartphone. Just that the transactions involved might take a bit longer than the 48 hours anticipated. But give it another few months and we will reach that stage – we are almost there.
Technology has moved so fast that while some experts still debate on whether 2017 is the year property technology (proptech) takes off or are still struggling to define it and analyse its impact, the start-up entrepreneurs behind it are already working to put their proptech apps into the market. In fact, some of the apps are already out, not just in America, Europe or Australia but in Asia as well, notably Singapore, Malaysia and China.
BIG DATA AND AI
How is this possible? Simple – big data and artificial intelligence (AI). For a simple example, it used to be the case that a lawyer has to go to the library and physically search for law reports that are relevant to his case. The process may take hours, if not days, depending on the complexity of the case. And he will spend loads of time reading up on one entire case just to extract out a few paragraphs that have arguments in his favour.
Now with big data (aided by AI), he can extract out the same paragraphs in a matter of minutes. Imagine how this can revolutionise the legal profession. How much time could be saved, and how the human agent is not necessary anymore for certain tedious tasks which could be automated.
In the case of property transactions, it’s even easier to apply since many of the clauses in a Sale and Purchase Agreement and Tenancy Agreement are standard. It will make the entire buying process more transparent, seamless and cut the time taken as every stage is automated. America is at the forefront of this tech revolution and the rest of the world is catching up.
What you get is a lot of time saved and time saved means money saved. With more time on your hands, you can scale up and do more research on your next investment.
‘FORGET LOCATION’
The future of real estate lies in technology without a doubt. It’s as inevitable as the driverless car or electric cars. “In this next phase of real estate sector transformation, the business of ‘bricks and mortar’ will no longer be about bricks nor mortar” says a recent KPMG paper on proptech or realtech (real estate technology). “Forget location. The new battleground in real estate, is technology, technology, technology.”
Real estate strategist and investor Dror Poleg even went as far as to predict that just like the IT industry where software providers are profiting more than computer manufacturers, and the car industry where software companies like Uber are eating into the profits of car manufacturers, the property industry will see a similar story replicated. Real estate apps which provide services and even concept products (the beginning and the end of the supply chain) will capture more of the profits than property developers who are in the middle of the supply chain.
“Developers and traditional operators are at risk of getting stuck in the middle of the supply chain, surrendering profits to ventures that specialize in developing attractive concepts, brands, and technologies on one side and to those who specialize in aggregating and marketing inventory on the other. This means that the overall yield extracted from real estate assets may rise, but a growing part of it will come from non-traditional business models and captured by new or innovative players. Ultimately, on-demand ‘space as a service’ might replace ownership and long leases altogether in many segments.” He adds it means that real estate owners and operators need to start thinking about other dimensions beyond location and traditional construction quality.
He notes this is already happening in Asia, where large technology companies (Alibaba) are investing in offline assets, large developers like Wanda are investing in online platforms and mobile payment technologies, and groups like Swire and Saw Capital are investing in co-working platforms.
“Developers and operators that lack the scale to acquire or develop new capabilities will be at a disadvantage. Traditional players are at risk of being shut out of large parts of the market by online aggregators or ceding most of their profits to new types of operators.”
He gave an example of how AirBnb has impacted the hotel industry to the point that it was suffering from ‘grief ’ but happily for it, some have adapted and are investing in sharing apps or expanding into related industries.
EXPONENTIAL GROWTH
Since 2012, venture capital funding into proptech companies increased 1,200% from US$221 mil in 2012 to US$2.6 bil in 2016, according to KPMG. This shows how fast money has poured into the sector resulting in more innovations at a faster rate. The paper predicts that if venture capital allocations into proptech continue to grow at the same rate over the next three years, the annual amount invested in RealTech companies by 2020 could reach US$20 billion. “This is comparable to the amount that is currently invested in FinTech each year.”
Some people think it could reach USD20 bil even earlier than that – the exponential growth could beat everyone’s forecast.
As proptech gains more traction, it is anticipated that more corporates will participate in it. Traditional operators will come under increasing pressure to adapt or perish, warns the KPMG paper.
TIPPING POINT
The increasing use of mobile will also change the way consumers access real estate products and services. In 2016, for the first time in history, mobile internet usage overtook desktop fixed line internet use according to technology data company, Statcounter. In November 2016, mobile internet access accounted for 52% of use cases, while desktop access accounted for 48%.
Ericson has estimated there are 2.6 bil smartphone subscriptions globally rising to an estimated 6.1 bil by 2020 accessing through 26 bil connected devices. It’s a number that’s hard to imagine today but that’s how fast tech can penetrate our lives.
The next generation lives and breathes mobile so companies that excel next decade would be the ones that have a very user-friendly mobile presence that incorporates AI. Another study found that 75% of the workforce will be Millennials by 2025. “This is the same demographic group that has the highest percentage of smartphone ownership and interacts with their smartphone more than anything or anyone else.”
Today’s proptech innovators are already putting their offerings through apps. Many of these are former real estate sector insiders who are dissatisfied with the slow-moving industry and are passionate about solving the problems currently plaguing the industry, particularly the cumbersome and long time needed to get things done amid generally high property prices.
NEW WORKING & LIVING MODELS
The US-based Poleg makes several observations based on his research:
-
- End-users are less likely to own or even sign long-term leases for apartments — can’t afford it, don’t want to commit, and prefer to pay based on usage;
- The practical importance of location is diminishing — people can work anywhere. The symbolic role of location as a way of signalling status or value is changing — ‘working in a third-world country is cooler than working in Manhattan’;
- Private living spaces are increasingly about function — a place to sleep (alone) between “experiences”;
- Public spaces (such as shared offices or residential amenities) are increasingly about meaning — sources of community, sites for exploration;
- Space is broken down into smaller value units, allowing end-users to pay only for the specific components they wish to use — desks, meeting rooms, bathrooms, beds, etc.
- Time is broken down, reducing the minimal commitment required from end-users to as little as 30 minutes — shifting profits to those who can secure large spaces “wholesale” and lease them out “retail” in smaller sizes for shorter periods of time;
- Incremental use (smaller spaces, shorter periods) gives rise to dynamic pricing models;
Equity is broken down, enabling smaller owners to share their financial burden with other small and medium investors; and - New attributes – community, curation (who else is there?), content (events), value added services, and availability on demand – are eclipsing location and accessibility as the key drivers of differentiation between assets.Having said that Poleg notes that Millennials will have more options available to them, possibly at affordable prices, on-demand. “On the other hand, the dream of actually owning real estate will probably drift farther beyond reach.”At a recent ULI/WEF real estate conference in Hong Kong, some participants pointed out that “We are nearing a global tipping point and digital transformation is an area that the real estate industry cannot ignore”.Conclusion: The proptech revolution means developers and traditional operators need to adapt or be left out. Technology waits for no one.
[/ihc-hide-content]