Proptech – the broad term that encompasses the application of information technology and platform economics to real estate markets – has experienced considerable growth since the early noughties. Though still dwarfed by its older cousin fintech, proptech is certainly no longer a niche phenomenon. But, is growth being overshadowed by recent news of online and hybrid estate agents falling short of the mark?
At the end of June, it was announced that pre-tax losses at NextDay Property, the company behind chain-free champions Nested, jumped to £13.4m last year. An increase of £8.9m compared to last year. While in the first week of July, we heard that hybrid estate agent giant Purplebricks reported pre-tax losses increased by 92 per cent to £56m in the year to April as they prepare to exit the US market following a dismal international expansion campaign.
However, the cracks that appeared were in the business models instead of proptech as a sector.
Chain-free champion Nested’s capital intensive business model, it can be argued, meant it was doomed for hiccups in a market dogged by uncertainty and the consequential ‘wait and see approach’ from buyers. While over at Purplebricks, a company backed by the crisis-hit UK stock picker Neil Woodford and Germany’s Axel Springer, it was the failed international expansion that has overshadowed the company’s strong and innovative presence in the UK.
But we shouldn’t let these failed ventures overshadow the huge success and potential of the proptech sector. In Property Week’s latest Power of PropTech survey, 95% of respondents said investment in technology would have a positive impact on their revenue around the next five years. And, 73% of respondents to a recent proptech survey by KPMG claimed they saw digital and technological innovations as an opportunity, as opposed to 1% who saw it as a threat.
By utilising technologies such as artificial intelligence and virtual reality, companies can take buyers and investors on a journey like never before, letting them visualise a property without actually stepping into it. These innovative marketing tools afford hybrid and online estate agents an opportunity to become market leaders in the end user experience. And, with real estate being the biggest market in the world, the potential to grow is endless.
We are also seeing key industry and government bodies developing their digital capabilities to increase efficiency. For example, HM Land Registry has publicised its interest in digital transformation (a project known as “Digital Street”). In particular, it is currently considering how the use of blockchain, the ledger system behind the Bitcoin cryptocurrency, and smart contracts in the conveyancing process could improve the service offered. It is hoped that with the use of blockchain, property transactions could be registered almost instantaneously thereby reducing the risk of fraud, speeding up the process and creating overall cost savings.
Whether big or small, all property businesses are undergoing a digital transformation. It would be hard – and rather stupid – to find a company which doesn’t have proptech in one form or another included in their long-term business strategies.
As Charles Darwin once said, “it is not the strongest of species that survives, nor the most intelligent. It is the one most adaptable to change”, and proptech is just that.