We had “ag-tech” and “fin-tech.” Now we’ve got “proptech,” a new word that keeps on cropping up every time people in the real estate industry talk about the innovations happening in the property market. The traditional way that people buy homes is being “disrupted,” or so some commentators argue and is being replaced by tech-driven solutions which promise lower fees and better access to the market for buyers and sellers.
What Is Proptech?
Let’s staff off with a definition. Proptech: what is it? Proptech is a catchall term used to describe the application of technology to the world of property transactions. In the past, the majority of the work of transferring the ownership of a property from one person to another was done by hand. But with the rise of digital technology, blockchain and crypto, that’s no longer the best solution.
Proptech describes any digital process that replaces any part of the property transaction process, whether it’s the transfer of deeds, making an offer, or creating new platforms for people to buy and sell their homes. At the moment, the term refers primarily to digital-based startups offering new services in the property market. But in a decade, it’s likely that the term will have evolved to describe a whole host of processes that do away with the traditional setup.
Is Blockchain Part Of Proptech?
Blockchain is a general technology that could certainly become an essential part of proptech. Blockchain is a bit like electricity: it’s a technology that can be applied across a range of settings to make things better. Blockchain, a technology that makes immutable ledgers possible, has the potential to change the property market forever, making it easy for buyers and sellers to transfer ownership without the need for a trusted third party.
What’s so amazing about blockchain is how it could increase trust in the property market. If you see a bargain Spanish property for sale, then blockchain could provide the technology that ensures that you obtain ownership without any of the risks currently associated with international property transactions. Blockchain could take care of both the sale and the contract. Smart contracts, as they are known, are contracts that automatically kick into action based on whether parties fulfil their obligations or not. So if you buy a property overseas, the smart contract is a record of the state that the property needs to be in for the sale to be valid. If it’s not, then blockchain can provide a record that everyone agrees on.
There’s another reason why blockchain is an essential part of proptech: it’s fast. You can carry out a transaction using blockchain in a matter of seconds, rather than the weeks that it currently takes through traditional banking systems. It’s possible that you could go to Spain, see a property that you love, and then buy it there and then, without any of the rigmarole currently involved. Of course, it’s unlikely that we will ever see transactions like this in reality – people will still want to have properties surveyed – but proptech on the blockchain could dramatically speed up the whole process.
Why Are Landlords Obsessed With Proptech?
Proptech has yet to find its way into the rental sector, but it could be a great way for landlords to improve their profits and cut their costs.
For starters, proptech provides property owners with the tools to bypass traditional, expensive letting agencies and go direct to customers. Landlords no longer have to pay agency fees and can split the savings between themselves and their tenants.
Second, proptech will make it easier for landlords to ensure that they keep their properties occupied. One of the problems with the current rental accommodation sector is the fact that renters have to sign up to long term rental agreements with landlords, promising to pay them for six, twelve or eighteen months. It’s not great for renters and, arguably, it’s a bad solution for landlords too.
The problem for landlords is that when they ask people to sign up long-term, they must ask for a lower rent in return to compensate people for the inconvenience caused by the agreement. People would like to have the option to move when they want, but fixed-term contracts take that choice away from them. Landlords, therefore, don’t make as much money as they could if they offered flexibility.
And this is where proptech can help. Because proptech makes the market so much more liquid, landlords can offer short-term rents of, say, one month, and charge higher per month, knowing that they will still have reasonable occupancy rates. Proptech platforms should be able to guarantee high occupancy rates, thanks to their enormous reach.
Third, proptech offers landlords the ability to reduce their marketing costs. Agency fees can be expensive. But with proptech platforms, it’s cheap and easy to put up a property for rent and advertise it to a wide group of consumers.
Will Personal Assistants Help Proptech?
Personal assistants have become a bit of a hit over the last couple of years, with Alexa and Google Home leading the charge. These assistants are fast becoming an integral part of the home, offering people the ability to bark commands and get what they want (like pizza delivery).
But personal assistants could also become an important part of proptech. Fundamentally, home assistants are sensor devices; they collect information about the world around them. These devices are a part of the internet of things, a growing network of connected devices that provide data to central hubs for processing. The IOT is vital for the property sector as a whole because it can transmit essential data about real estate to property managers, owners and buyers.
Suppose, for instance, that you want to buy an apartment in a big city. Right now, if you want to find out how noisy it is, you have to travel to the property itself and then spend time in it, listening out for traffic and drunk people in the street. Of course, it’s often not possible during the short amount of time you spend there to get a sense of the noise levels, meaning that buyers often do so blind.
The IOT could change that. Platforms could insist that sellers provide sensor data for noise to be able to sell on their network, and then buyers could get a complete picture of how loud is it actually likely to be once they move in. There are dozens of other applications for sensors too, including traffic levels, air pollution and light pollution.
Is Proptech The End Of Privacy?
In many ways, the era of personal privacy is over. Companies can rifle through your internet history, even after you delete it. Google can monitor which sites you visit and what you type in emails. And the government can rummage through your bank statements and find out what you’re doing and where you’re spending your money. It’s a tragedy for personal liberty.
Proptech could make the issue worse. Homeowners already worry about the impact that something like Alexa might have on their private space. The home used to be a place that was inaccessible to anyone, except people who lived there. But with IOT tools, that’s no longer a guarantee. Hackers and other agencies could potentially use IoT devices to collect data and monitor individuals in their homes. That, in turn, could lead to a backlash against some aspects of the technology, making it less popular.
Will Proptech Make Buying And Selling Easier?
One of the reasons a lot of people don’t get into the property market is because of the sheer difficulty of buying and selling. Selling a property on the open market is much more complicated than selling your clothes on eBay. But proptech could make that easier. How?
The primary way it could do this is through the use of AI. Take property search, for instance. Buyers often have to spend hours looking through homes to find the one that they want. But with AI-powered search, that becomes a lot easier. Homeowners would simply tell a platform what type of property they want, and then the platform would deliver results based on their criteria. It would be much more sophisticated than today’s filter menus.
Ultimately, proptech will help everyone in the property market reduce the costs of transactions – the central issue in the market today. Sometimes people spend upwards of ten per cent of the value of their home on fees to transfer ownership from one party to another, representing a significant drain on their personal finances.
Privacy may become a concern with proptech, as it has with many other new forms of technology. But it’s likely that the benefits will initially outweigh the costs. People continue to buy smartphones despite the fact that they are incredibly invasive.
There’s no doubt that we will see a more significant role for blockchain in the property market. When that happens, it could undermine the traditional role of banks and lead to massive upheaval in the mortgage market.