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