Property is a multi-billion pound industry that we are all involved in one way or another, but it has become dominated by large estate agents who are resisting to evolve against the problems facing UK housing. As we speak, there are thousands of entrepreneurial people in innovative companies in the early stages of development changing the very fabric of property investment.
You could argue that change and innovation originates and is inspired from a system that is failing or at a point of unsustainable stagnation, and the same could be said about the rather archaic real estate system. Oxford Professor Andrew Baum argues there are “clear problems with how UK houses are transacted.” Estate agents are motivated by a fast sale over a fair price and house prices in the UK are increasing by 5.4% annually, whilst average annual earnings drop. It comes as no surprise that in England, home ownership is at a 30 year low. In fact, the level of private renters is higher than in the 60s, doubling in the past decade alone. Millennials are feeling more disenfranchised from the real estate market than their predecessors and counterparts in different countries.
The two words that make up PropTech are of course Property and Technology, and the fusion of the two is engineering a boost to a traditionally conservative industry. PropTech encompasses smart real estate, the shared economy and real estate fintech.
- Smart Real Estate: tech-platforms that control and operate property assets e.g. provide information about construction and performance, or control it
- Shared Economy: tech-platforms that carry out the use of property assets e.g. provide information to prospective buyers, or facilitate transactions
- Real Estate Fintech: tech-platforms which carry out the trading of who owns the property asset, whether it’s the property itself, property funds, equity etc. Ownership alludes to either lease or freehold.
Property can be expensive, difficult and time-consuming to manage, and is usually reserved for the more affluent, but companies like Homegrown are changing this, by handling all of the admin and making investments more flexible. All of the legal jargon, reports, sourcing projects and people is handled by our team. Having no physical high-street store keeps overheads low, replacing it with a simple comprehensible online platform. So many are struggling to take their first step on the property ladder in the traditional way, and PropTech provides an interesting alternative. Agents have gained notoriety for their fees (£233 per tenancy agreement), but PropTech cuts out the middle man, and allows customers to make more balanced decisions from the comfort of their own home.
History has shown us that property is truly distinct from bonds and assets, and stands out for its diversification potential, which mitigates the risk rooted in market unpredictability. Traditionally, you may invest a large amount of money into a very limited amount of properties, but PropTech has flipped this convention on its head, allowing you to invest less in more properties, spreading the risk across multiple custom-picked projects that you can decide on. However, it is still important to remember that property as an asset suffers from a lack of liquidity, so like any investment, there is always risk involved.
Using smart technology and innovative approaches, PropTech boasts:
• Increased quantity and quality of information, faster
• Less human error, as systems are machine-led, which means less costs
• More transparency and balanced information
• Shorter transaction times
• Less illiquidity and greater chance of good turnover
It is expected that the traditional real estate system will be forced to change or retreat by technology, as other industries have. The people behind PropTech are working hard to reignite a system governed by agents demanding unsustainable fees for self-interest. There are undoubtedly problems facing PropTech, such as property’s illiquidity, and the misconception that as a product of the Fintech revolution, these platforms are exclusively catering to millennials, when that couldn’t be farther from the truth. There are still obstacles to tackle, but by rebelling against the status quo and maintaining a standard of excellent customer service, Proptech could do what AirBnB did to hotels.