Proptech: digitization shakes up the real estate business
Virtual reality, big data and blockchain technology are changing the norms of the real estate business, as startups seek their place in the housing market.
Now it’s the real estate sector´s turn. The housing market has some new dwellers - the so-called “proptech” startups, which seek to innovate and add value to the real estate market through technology. These companies, which take their name from the union of property and technology, compete with traditional Spanish websites such as Idealista and Fotocasa.
Apart from its usefulness in video games, virtual reality (VR) can speed up property sales and rentals, according to the companies in the sector, such as the Spanish startup Baboonlab. Goldman Sachs estimates that in 2025, the VR business in the global real estate sector could surpass $2.6 billion.
Thanks to VR, users can take a virtual tour of the property they are interested in, see what finishings go best with the construction, or how it would look with a specific renovation, or paint it a certain color, or furnish it…and all that, with a pair of eyeglasses. “Virtual reality is an excellent tool for builders to show their product to potential clients before even digging a hole in the ground,” says Ben Bancroft, director of the British company ArcMedia, which is devoted to creating computer images of places that haven´t been built yet.
Its not just about seeing, but about feeling. According to Bob Yuan, president of Circle Visions, you can´t compete with the emotions that this technology evokes. “You can open doors, turn on light…the user experiences feelings,” Yuan says. His company offers virtual visits to imaginary properties so the customers get an idea of what a home would be like, once it´s constructed.
Drones are also gaining ground. The views from these flying machines offer a global view of a property from the air, giving a new perspective about it and about the surroundings. Thanks to this bird’s-eye view, the client can see the transport facilities that are in the area, the community services, or the density of traffic. The aerial images also facilitate the monitoring of a home under construction and allow clients to detect possible faults in advance.
"Know-it-all" search engines
Big data, geolocation and machine learning are all key to getting the most attractive offers to consumers and to real estate investors. The housing search engines are moving ahead with giant steps. According to the U.K newspaper The Telegraph, in the future, search engines will be personalized and will handle enormous volumes of data, including interactions with social media and a web history, in order to create a “psychographic” profile of the lifestyle of the buyer.
“Today, the housing search engines filter out clients by their budget and by the number of bedrooms they seek, but consumers in the year 2020 will wait for the search engines to connect with their personal data and found out if they want a property with a yard, with a southern exposure, near a train station, close to a music school for their daughter or to a bar that serves good artisanal beer,” says Douglas McCabe, CEO of Enders Analysis.
Compared to virtual reality and big data, the role of blockchain technology in “proptech” isn´t clear, at least not in the short term. The specialist firm Finovate points out that some experts believe the significant use of blockchain is still years away. Others see opportunities for improving the process of applying for and granting loans, increasing transparency in terms of ownership and improving the security and the integrity of transactions.
Among the leading protagonists of this business of technology and bricks are the digital agencies, which have become consolidated in recent years, particularly in the United Kingdom. People are increasingly comfortable with the online agency model, which should increase the participation of virtual agencies in the United Kingdom, says Alex Gosling, founder of Housesimple. Currently, virtual agencies have 5% of the real estate market and they could reach 15%-20% by the year 2020.
According to Anida, the real estate agency of the BBVA Group, in the last five years, the “proptech” sector has gone from a value of 200 million euros to 2.5 billion euros, causing the number of proptech companies rise from 72 to 235 during the same period. The majority are American and British and they work mainly in property management, analyzing supply and demand with the help of big data. Other platforms of note are Be Street Smart and Movebubble in the United Kingdom, and BBVA Valora in Spain, which already has 1.7 million searches.
Other startups help to simplify the processes. Housy, a platform launched at the start of this year, allows property owners to see or rent their properties without a commission, while Housell, which helps customers to sell their homes without intermediaries or agencies. Others try to diversify the investor base, such as the crowdfunding platforms InvesReal, Inveslar, Privalore and Housers. This latter company managed sales with a total value of 17 million euros during 2016.
Some online rental companies such as Wimdu, Spotahome or the well-known Airbnb are also part of the ecosystem. “Proptech” encompasses other areas, among them domotics, which has tools such as Iomando and Momit, that are able to open doors or adjust the temperature in a home from a smartphone.
The Spanish proptech map
The map divides the companies into nine categories, from portals to “peer to peer” technological solutions for rentals and sales, through big data, real estate software, startups for collective real estate investing, VR, mortgage financing and domotics (intelligent homes).
Some of the startups that are part of the fabric of “proptech” are Hundredrooms, a comparer of apartments, houses and rural homes; Realo, a simple tool for estimating the value of a house; Libelium, a company that measures, monitors and sends signals from a distance; Brickfunding, which brings together in a single portal all the real estate crowdfunding projects that are publicly available on Internet: ProNest software, which helps manufacturers and builders to increase their savings on materials and drive productivity up and Pisocompartido, which as its name indicates, finds rooms for rent all across Spain.