The State of PropTech

Among the many strands of X-Tech that we have come to hear about, PropTech is currently emerging as something of a hot topic, judging by a recent Meetup in Melbourne organised by MessageMedia. With the ambitious goal of exploring the “Past, Present and Future of PropTech in Australia”, it was clear that the field can mean very different things to different audiences.

Facilitated by Bec Martin, the panel comprised Shelli Trung, APAC lead for the Reach PropTech Incubator; Mark Armstrong, CEO of RateMyAgent; Alan Tsen, seed round investor with a focus on disruptive FinTech startups; and Nigel Dalton – ex-REA Group, who also gave a key note address.

Given the format and nature of the discussion, I won’t attribute specific comments to particular individuals. Instead, here are some of the panel’s observations (in no particular order), including some pitfalls for the industry, and key points that all market participants will need to consider.

  • In light of recent events, it was perhaps unsurprising to hear the view expressed that WeWork is “not very prop, not very tech”, as its business model and funding challenges became apparent. Generally, the view was that the co-working space fad has had its day (although Melbourne still manages to support numerous co-working spaces and models, not all like WeWork, since the local demand is there?).
  • We face significant local economic challenges (low inflation leading to minimal GDP growth and negative interest rates; declining wages/purchasing power in real terms; falling retail spending; over-extended household debt; and underemployment in the wider job market).
  • On the other hand, Australia still hasn’t had a recession since 1991, and house prices have just seen the biggest monthly increase since 2003, yet banks are imposing more stringent lending criteria.
  • Depending on which economic theories you favour, this either means easier access for first time buyers thanks to lower interest rates; or more rent arrears, increased mortgage stress and greater homelessness because of a lack of affordability and/or deteriorating lower cost housing options.
  • PropTech is not just two-sided online residential market places (although data analytics and digital marketing capabilities are integral to that particular segment).
  • PropTech should also embrace sustainability in terms of environmental efficiency and affordability. Social impact will likely mean adjusting home owner expectations in terms of dwelling size and carbon footprint. Equally, smart cities and more mixed use development is also being increasingly factored into urban planning and infrastructure design.
  • The increase in higher rise and higher density housing has also led to cost cutting in the choice of materials (flammable cladding), and deregulation and other factors have exacerbated structural defects where there is inadequate insurance protection for home owners.
  • What is happening where PropTech and FinTech intersect, such as the notion of fractional ownership? While this is something that is increasingly more likely (especially with Blockchain technology and tokenisation) if first time buyers have no other way to access the property market, what should be the appropriate licensing regime for these new financial products? What should be the credit risk criteria, lending models, prospectus design, funding structure and tax & accounting treatment? What if such developments include social and inter-generational housing? Or achieve the highest environmental standards/lowest greenhouse emissions?
  • For Australian PropTech startups wanting to go global, there were some warnings about the lack of cross-border tech transfer, and an absence of cultural awareness and curiosity by founders.
  • Meanwhile, on some measure, Facebook is probably the largest residential rental marketplace in the USA. What does that signify for future markets and property transactions?
  • Despite the success of real estate market places in Australia, the model does not easily transfer or scale in other countries. Equally, models from overseas might not work here. There was some scepticism about the so-called “iBuyer” model, and also the agency aggregation approach by firms like Compass (“you can’t buy relationships”). Plus, even local brands can go sour (e.g., Run Property and its subsequent merger with Little Residential to form LITTLE Real Estate).
  • IoT-enabled solutions are a growing theme, especially in aged care, and where AI learning patterns are being applied to energy efficiency, for example, or to improve facilities management (another PropTech segment ripe for disruption). This also links to the use of and intersection between On-line/Off-line data, such as CAD and 3D modelling, and “digital twins” (real-time databases of building design files) for mapping and monitoring physical structures. While in the UK, the concept of, and need for, Digital Twins has led to a raft of industry-wide initiatives and collaboration.
  • Despite Australia’s impressive work in creating standard data structures for residential property, there is still a lack of transparency when it comes to the results of private auctions (but isn’t that the idea – they are “private”?). According to the panel, similar data overseas is considered to be quite “dirty” (unstructured and non-standard).
  • The panel anticipated new PropTech opportunities for those companies offering “high touch/high end” services, and those providing “low touch / high tech” solutions.
  • One common data and infrastructure management challenge is dealing with legacy information systems, and sluggish internet speeds (despite, or because of, the NBN), meaning there will inevitably be some bifurcation in service and quality, depending on building design, purpose, age, location, value etc.
  • Finally, there were concerns that as security data and facial recognition technology becomes increasingly algo-based, it raises questions of privacy and misuse of personal and confidential data.

Next week: Signing off for Saturnalia

 

 

Notes from Phuket

Last week I was privileged to spend a few days in Phuket, for a wedding. The last time I was there (in early 2011, and for another wedding), I noticed the number of bars and shops that had added Russian to the list of languages on their signage and menus. This time, in the area where I was staying, all of the hoardings around the real estate developments were only written in English, Chinese and Russian – clearly a targeted marketing strategy for the new apartment blocks and resorts currently being built, and further evidence that the island is at something of an international cross-road, if not actual destination.

The wedding party itself was an international affair – guests had travelled from Hong Kong, Singapore, Malaysia, Europe, US, Australia, Japan and Thailand itself. Moreover, the demographic was decidedly multicultural, and comprising mainly multiracial and inter-faith couples and families. Not surprising given that nearly all the guests were expats, most of whom had met while we were working in Hong Kong.

The truth is, all of us who were there are beneficiaries of globalisation – choosing to move around the world for work (and for love). Just the sort of gathering that would incur the disapproval and wrath of anti-globalists, racial purists, and religious fundamentalists. Most of them would hate the idea of such a global affair, given the current environment of nationalist, protectionist and segregationist politics that pervades much of the world (Brexit, Trump, Middle East…).

Although the prospect of Brexit was largely lamented by those in attendance, the bigger concern was of course about Hong Kong. While the latest and most dramatic phase of the popular protests there seems to have abated, and although the pro-democracy candidates dominated the recent local elections, there seems to a complete absence of political dialogue between the Hong Kong government and the protest movement.

One school of thought is that the Hong Kong government took it for granted that it could enact the proposed (and highly controversial) extradition Bill. It may have even convinced the Central Government in Beijing that the Bill could pass into Legislation unopposed. If so, that suggests a huge misjudgment and a lack of communication and consultation on all sides.

Of course, should the major experiment in political, economic and social integration (one country, two systems) that is the Hong Kong SAR fail, it will be a major obstacle to resolving the issue of Taiwan (for which it is supposed to have been designed). It would also represent a setback to the concepts of international co-operation, free trade and self-determination, within a framework of mutually recognised and respected co-existence between sovereign states.

Meanwhile, back in Phuket, it was great to sample some authentic Thai food, enjoy the glorious sunsets and embrace island time. Re-visiting Patong after more than 20 years revealed just how industrialised the island’s so-called entertainment area has become – but in the spirit of globalisation, multiculturalism and international trade, at least it doesn’t discriminate: everyone (and their money) is more than welcome!

Next week: The State of PropTech

 

 

Crypto House Auction

Earlier this month, through my work with Brave New Coin, I was lucky enough to attend the first live property auction to be conducted in cryptocurrency. Although the property was passed in on the day, the event generated enough interest and PR value that it will surely be only a matter of time before more large ticket assets are transacted in this way.

Image sourced from LJ Hooker

Let’s not forget that it’s nearly 9 years since Laszlo Hanyecz paid 10,000 BTC for two pizzas (then valued at about US$41).

Although we may not yet be paying for our morning espresso with Bitcoin, a growing number of merchants are enabling customers to pay for goods and services with crypto, via payment platforms and intermediaries such as Living Room of Satoshi, and TravelbyBit. And services such as Coin Loft and CoinJar make it easier to buy and sell the most popular cryptocurrencies without having to set up accounts on multiple exchanges.

Meanwhile, the house in Casuarina, on the northern coast of New South Wales, was passed in at 457 BTC (A$3.4m). The property was listed by LJ Hooker, and the auction was facilitated by TrigonX and Nuyen, while Brave New Coin supplied real-time market data convert the crypto bids to Australian dollars.

Next week: Demo Day #1 – Startupbootcamp

 

Tales from Tasmania

There’s a slightly misleading advertisement for Tasmania that greets arrivals at Melbourne’s international airport. “You got off one stop too soon” is the message. But there are no scheduled international flights to or from Tasmania, so overseas visitors must travel via the Australian mainland. Just one of many idiosyncrasies that occurred to me on a recent visit to the island state.

On this trip, I experienced the snowfalls on Kunanyi (Mount Wellington), sampled the local produce at the Farm Gate Market (a popular destination, no doubt helped by TV programmes such as “Gourmet Farmer”), enjoyed tasting the wine at Moorilla, the cheese and beer on Bruny Island, and the beer at the Cascade Brewery.

I also spent a very wet day in Richmond – but some attractions in this historic village are at risk of pricing themselves out of the market, especially outside the summer season. And despite being another popular destination, the shops and galleries along Hobart’s Salamanca Place seemed tired and lacklustre, especially when compared to what else Tasmania has to offer.

In particular – MONA. Its opening in 2011 has added to Tasmania’s growth in tourism, and no trip to Hobart would be complete without a visit. It might not be to everyone’s taste, but what David Walsh has managed to achieve here is nothing short of incredible. Talk about putting your money where your mouth is…. The current exhibition, ZERO, is a powerful survey of this post-war movement in German art.

Notwithstanding the cutting edge culture represented by MONA, you can’t help feeling that Tasmania represents a microcosm of the Australian psyche, and in particular the tension between traditional, conservative beliefs, and modern, progressive thinking. Tasmania was the last state to decriminalise male homosexuality (following Federal intervention), and abortion was only decriminalised as recently as 2013. The fact that access to publicly funded abortion is extremely limited may or may not be linked to the state’s high rate of teenage pregnancy – but it is certainly the background to a high-profile unfair dismissal case.

Tasmania has been the setting for other significant social and political battles (and ecological victories), especially those involving logging and damming. The state’s natural beauty and reputation for a clean environment makes it popular with overseas visitors (and probably some prospective survivalists in the wake of New Zealand’s new property ownership laws). However, the growth of short-term holiday lettings is seen as contributing to a local housing crisis.  And the significant contribution that tourism makes to the local economy cannot hide the fact that on the basis of total and per capita GSP, Tasmania’s economy looks comparatively insipid.

Next week: Sakamoto – Coda and Muzak