The less technology has penetrated in a given industry, the more potential it has to produce significant benefits in it, because there is plenty of low hanging fruit to be picked.
This is the case with real estate, which is known for being resistant to changes and slow on the adoption of technological innovation.
Over the last few decades, real estate companies have increasingly integrated technology to their business processes, but at its core the industry continues to function the same today as it did decades ago. Technology is viewed as a tool, instead of as an integral part of companies’ business models.
The industry is also affected by excessive intermediation by actors that aren’t adding real value, and overly complicated processes and excessive bureaucratisation.
What is “adding value” through technology in real estate?
In short — anything that reduces the costs for consumers and the organizations that serve them.
Tools that aid in disintermediation of real estate processes are a good example. By replacing the heavily mediated transaction model that is common in real estate to a quasi peer-to-peer model, parties are able earn more money than under the current system.
The same is true with tools that aid in automation, such as automated risk analysis (for mortgages for example), property valuation, or contract writing.
These two ideas, disintermediation and automation, have fuelled many of the startups that are currently driving the growth of the PropTech sector, using technologies as diverse as virtual reality (virtual visits to properties), big data (automatic property pricing), home automation (reduced costs and greater comfort), crowdfunding (democratised, faster funding of real estate projects), or open banking (risk assessment and buyer intelligence).
How exactly does PropTech improve real estate activities?
Here are some examples of how proptech is changing practices in the real estate sector for the better:
Buying a house off plan used to require using your imagination to have an idea of what it would look like once finished. Now, with virtual reality tools, buyers can actually visit the house before it has been built. This increases trust and reduces the possibility of disappointment later on.
In the past, investing in real estate required a significant amount of resources and as such was only in reach of a select few, but real estate crowdfunding platforms have changed this, effectively democratising this market and opening it up to smaller investors.
The same goes for mortgages: Open Banking technologies make it possible to dramatically speed up the mortgage concession process, from identity verification and credit and risk analysis to processing payments.
Digitalisation: an opportunity to stand out
Joining the wave of digitalisation is not a matter of fashion, but of increasing your company’s competitiveness.
Saving a potential customer from having to go through flat viewings (offering them on a virtual platform or helping them select only those that fit their requirements perfectly); saving time, trips and bureaucracy when granting mortgages; enabling small savers to have access to real estate investments; providing developers with data on real housing needs in an area; knowing what a home will look like once it’s been built (or renovated, or decorated), and so on. All of this is possible thanks to technology.
With technology, progress is often a trickle, in which a few early adopters make big strides in the market and get ahead of everyone else, and then all of a sudden the dam bursts and everyone jumps in. At that point, being a first mover is important, so when it comes to the digitalisation of the real estate sector, being one of the organizations leading the charge has the potential to add much value later on.