UK SMEs are leading the PropTech charge
Last month the Chancellor announced a temporary cut on stamp duty. Homebuyers in the UK traditionally paid the duty as a lump sum when purchasing a property over £125,000. The change announced increases the minimum threshold, and now there will be no stamp duty to pay on homes priced £500,000 or less.
As a result of this time-limited stamp duty holiday, the housing market is coming out of lockdown swinging for the fences. Sellers are rushing to list their properties and buyers – who now realise working from home may become more common and can appreciate the value of a dedicated home office (or garden) – are looking to seize on this opportunity.
Rightmove reports an increase of 75% in buyer enquiries, and as a consequence of this unexpected change, the property sector is needing to work overtime to cope with this increased demand. These concurrent trends, created by the stamp-duty holiday and the lifestyle caused by the lockdown, are making the entire sector gear up for an uptick in business.
Although technological strides have been made, there is still plenty of room for efficiency improvements to raise the productivity and output of firms working in the property sector.
A very dynamic sector is Proptech, which is often defined as the new business models for real estate markets and digital innovations that are developed (and implemented within) the real estate sector. These are often led by nimble, ambitious, and highly innovative start-ups who are injecting technology to the real estate sector.
Among the 300+ high growth companies tracked on Beauhurst - a platform that tracks the UK’s fastest-growing companies - we observe the following stage of evolution:
But you may be asking, “how can technology really impact such an established sector?”
Correction, technology is already disrupting this sector and we believe it will turn the entire shopping journey on its head.
Until the recent past, the process of arranging the viewing of a property had not changed all that much. Maybe the last major change was the use of emails rather than exclusively relying on phone calls. But this process is still very manual, time-consuming, frustrating, and uncertain. Across email, pictures and many other important documents such as the EPC ratings and maps can be shared with the prospective client. This considerably improved the process but shoppers were still limited by choices available in the inventory of one (or a few) local property managers.
Property aggregators started to change this inefficient journey. Now a prospective tenant is no longer restricted by a few property managers and can create tailored searches, filtering results based on preferences and needs. This innovation effectively creates a triadic marketplace where the exchange of services (or products) is enabled by the creator of the marketplace, a virtual space where many buyers and sellers meet to trade. A model not too dissimilar to the classified pages on newspapers or to Airbnb, who now has more listings worldwide than the next five largest hotel brands, combined. The same is starting to happen in the property market, albeit on a smaller and more localised scale.
According to Property Week’s 2018 survey, almost half of property professionals said they have already built a digital roadmap that will help their business move towards digital transformation. Some very exciting British start-ups are leading the Proptech revolution, one of them is Proportunity. This SME uses machine learning AI and predictive analytics to forecast future house prices; it then identifies the areas of London that will see the highest growth in the immediate future. The idea is to look at these data and use it to gain market insights, which are then leveraged for data-driven decision making. In the case of Proportunity, as an authorised mortgage lender, if the price of the house goes up, the amount you pay back will have increased. But if the price goes down, the start-up loses money. Using data from crime, school ratings, pollution and broadband speeds, the risk of property loans for both lenders and borrowers are significantly reduced.
Another ambitious home-grown company is Search Acumen, who has recently launched a new service, Data Snapshot, which provides official data at the touch of a button to conveyancers and CRE lawyers to allow them to preview and assess risk from the very start of a deal.
We’ve been creating a series of tools over the past few years to allow legal professionals to search aerial and individual property data using algorithms and to pull out the data required to do due diligence on an instance basis. As this data becomes trusted, the old way of doing this will be replaced by algorithms and technology.
Managing Director, Search Acumen
But there is much untapped technological potential. Some technologies can dramatically disrupt the sector and shopping experience, enabling a seller to gain a competitive edge, while improving its offer to customers. Among these technologies, we believe the following deserve special attention:
The management of buildings and specific properties still involve many repetitive and time-consuming tasks. Based on our experience with technology and software, these are the ideal candidates for automation, and where it can elicit the most significant ROI. Automation not only dramatically increases output, but also reduces errors, all whilst improving staff morale as employees are now free to dedicate their time to more engaging (and revenue-generating) activities.
Sensors and IoTs
Both are very exciting and have an immense disruptive potential. While some have used it for rather futile ends (e.g. the £100 smart kettle that is voice-activated and can be turned on via an app, or BinCam the trash can that every time you open automatically uploads a photo of what’s inside to Facebook) the technology itself is not at fault here. Sensors can be used to measure air quality, noise and pollen levels; these data can then be used as a selling point and differentiator between different properties. More importantly, they can be used against the competition who may not be able to provide these details to prospective clients. Sensors and IoT can also be used to send out alerts to facilities management, to service and monitor the building. This can dramatically decrease the time (and costs) associated with routine maintenance.
Virtual reality (VR), Augmented reality (AR), Mixed reality (MR), or the all real-and-virtual environment generated by computer graphics and wearables, Extended reality (XR)
The Mortgage Finance Gazette reports that 1/8 real estate companies are likely to invest in these technologies for marketing purposes over the next 5 years.
Virtual property tours have taken off. Whilst, some agents have started to add video tours of the properties, other sellers and property managers are just beginning to invest in AR. The bottom line is that the full potential of XR has not yet been realised.
AR allows house-hunters to cover much more ground, viewing a large number of properties in a short amount of time and at no increased cost. But with AR or MR – which is an overlay of synthetic content anchored to objects in the real world – future tenants, designers, architects can enhance their understanding of the property giving them a taste of what the final product could look like.
The pandemic is impacting almost every aspect of our life. This sector, Proptech, is being affected by it, but irrespective of the current situation these changes are here to stay, and for the years to come.
While sooner or later, we will find a solution to this acute health crisis. Technology will always be disruptive. Adapting to these technological changes is imperative to remain successful or gain a competitive advantage.
According to Fabian Braesemann, a research fellow for the Future of Real Estate Initiative at the University of Oxford, Proptech promises to be for real estate what Uber is to taxis: a slicker, easier way of doing business.
Some of the innovations described here may not be requirements today to be successful. Some may never become essential features to be successful in this sector. But what is certain is that the ones who deal with change by “sticking their heads in the sand”, are always doomed to fail and be overtaken by the competition.