Real Estate is often referred to as an industry that has struggled to embrace technological change over the years. Despite being the largest commodity in the world with a market value of $217trillion, it has struggled to keep up with technological trends.
Throughout my professional career I have invested in real estate in the form of funds, developments, commercial and residential properties but never before have I seen as much technological change as in the last 12-18 months.
In 2012, $300 million was invested into PropTech companies and $1.5 billion in 2015, with the total number increasing year on year since then. This investment has driven huge changes and new opportunities in real estate investment that are worth talking about:
According to the National Association of Realtors, as many as 56% of 36 year old and younger buyers are finding their homes on the internet, meaning that being an agent or an investor on the cutting edge is essential. Technology is evolving and so are behaviors. More and more buyers and investors are using technology to view, review and decide what kind of a property they want to purchase. Despite this, tech-related concepts appeared three times in the results of a survey performed by PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULL).
This data was published in a 2018 analytical report entitled “Emerging Trends in Real Estate: USA and Canada.” The 100+ page document dedicates a full section to technology and makes it apparent that tech is one of the most underappreciated and underutilized tools in the real estate arsenal.
Below is my personal take on the most impactful changes that technology is making to real estate investment.
Traditionally speaking, real estate investment has long been a local enterprise - if you were buying or investing, you had to be at least familiar with your target area, including being physically on site.
This is no longer the case, online investment platforms now allow you to browse and invest in properties and countries on the other side of the world, while also providing any useful information you might need on the local market and regulations.
This global version of the real estate industry is here to stay – the EY Global Market Outlook 2016 identifies both innovation and transcontinental reach as two of the major trends currently affecting the real estate industry, especially considering the amount of money now available from emerging countries.
At Bricksave one of our goals is to take advantage of these technological advancements and offer investors in Latin America the chance to access global institutional class real estate investments.
As online access is expanding, barriers to enter the real estate market are slimming down and are opening more opportunities for a broader consumer base.
Non-professional investors used to feel excluded from the property sector by its bureaucracy and extensive ladder of middle-men, opting instead to turn to investment funds and REITs; but the space for these intermediaries is slowly getting smaller, and online investment - facilitated by platforms that offer services like Real Estate Crowdfunding - is becoming more and more popular.
While the developed world’s contribution to the real estate market declined after the financial crisis, the emerging markets’ contribution increased, reaching a peak in 2011.
This demonstrates the new role that investors from countries such as Brazil and Argentina are starting to play in the global property market. Technological advances in the industry will only further that trend as individuals can now take advantage of Real Estate Investment like never before.
As mentioned above, bureaucracy and paperwork used to plague the real estate sector. With all-encompassing services being offered by platforms today, even the transactional portion of a property deal can be done online, requiring minimal input from financial institutions.
This means that real estate investment is fast becoming something you can do in an afternoon, as opposed to a process that’s drawn out over several months. In recent months the emergence of Blockchain has emerged as an additional route for facilitating Real Estate transactions and is removing even more pain points for potential investors.
Like most industries, mobile technology has the potential to have a significant impact on real estate. Along with new platforms that can be used on the go, the majority of property brokerages have mobile versions of their sites, and some are even developing their own dedicated app to compete with emerging startups.
Forbes magazine recently pointed out that platforms such as Zillow are fundamentally changing the way in which people buy property, allowing for easy access to market information and purchase options straight from the user’s mobile device.
What this will do to the industry is potentially make it markedly less formal; Instead of requiring a real estate agent or fund manager to buy or invest in a property, you will be able to do it on your phone, regardless of where you are.
Buyer trends and emerging technology are making it necessary for agents to adapt and shift from being traditional simple salespeople to be becoming experts in their field. Without doing so they will be made redundant.
Investment platforms such as ours are also using their expertise, experience and scale to get better deals for smaller investors and letting them see what opportunities are really out there in a more transparent manner.
Whilst it can seem counterintuitive, more often than not increased transparency comes with increased privacy. A 2014 study found that 7 out of 10 mortgage companies conduct practices that put personal and financial data at risk. As this trend for privacy continues and people are more than ever afraid of large social media companies privacy breaches, Real Estate investment platforms will fundamentally need to become even more secure than they already are.
Sofía Gancedo, the Argentinean who founded a real estate crowfunding platform and is going for a US$ 100 million megafund.
The system uses an algorithm of 3,000 data points, which looks for investment opportunities where there may be appreciation. "Each property has an estimated annual rental return of between 7% …