A guide to PropTech (and how it’s shaking up real estate)
Posted on: 17 April, 2024
PropTech is the latest technological innovation that is set to revolutionise real estate. Here’s how it works.
There’s no denying that digital acceleration has become a driving force behind the modern world over the last few decades. This transformation was catapulted further during the COVID-19 pandemic when human interaction was limited across the globe. In fact, emerging from the subsequent lockdowns in 2021, a study revealed that 67% of key industries had accelerated their adoption and reliance on digital products.
As a result, technology has revolutionised the way we work, communicate, shop, learn and live, and digitalisation has dramatically reshaped business structures and models. This is due to an increase in competition and a bid to meet the changing needs of the market.
Every sector has made changes to adopt new tools and leverage the power of automation, from manufacturing, automotive and retail to healthcare, education and everything in between. Real estate has also benefited from the power of new technology and we’re going to look at how property technology (PropTech) is shaking up the industry.
What is PropTech?
Put simply, PropTech is the use of technology to help both businesses and individuals manage real estate. From researching to buying and selling, these tools have been created to address the needs of those in the property industry.
These tools have been designed to streamline each stage of the real estate process and to connect the different areas of the market. For example, helping to connect buyers, sellers, lenders and landlords through different platforms and technology.
For now, PropTech consists of three major segments and these include smart homes, sharing real estate and real estate FinTech (financial technology).
A brief history of PropTech
Although lots of the advances in PropTech are relatively new, the concept itself dates back to the 1980s. Back then, these tools were more basic, with real estate companies investing in personal computing and software like Microsoft Excel. These tools steadily became more advanced between the 1980s and 2000, allowing industry professionals to work with more accuracy and insight.
Between 2000 and 2010 the dot-com bubble made it possible to move sales and residential listings from print to digital media. And over the course of the decade, access to high-speed internet meant that more real estate companies began to move their data and services online.
From then on, PropTech has only become more sophisticated, with the industry making $43 billion across the globe between 2012 and 2020 alone. This was then accelerated once again by the pandemic, with many traditional stores closed and house viewings moved into the virtual space.
4 examples of PropTech
From apps to devices, digital technology has been a huge disruptor in the industry. So, in order to build a better understanding of PropTech and how it is shaking up real estate, it’s important to look at how it is being used. Some of the most popular examples of PropTech include:
Big Data
Large data sets, now gathered by virtually every business, allow professionals to identify trends, formulate strategies and assess their goals. This technology is called big data and refers to the tools that organise and interpret this information.
For the real estate industry, big data is used to produce more accurate property evaluations, relying on information from geographic, demographic and economic factors. This provides estate agents with genuinely useful insights into their customer’s needs.
Artificial Intelligence (AI)
When dealing with clients, the traditional in-person paper contract method has become outdated and obsolete. Nowadays, digital tools make it possible to communicate quickly, view houses virtually and even sign contracts from a smartphone. So essentially, AI makes it possible to streamline the process and offer the best possible customer experience. Not only this, but it is also being used by industry experts for property management, valuations, selection and predicative investment.
Internet of Things (IoT)
IoT devices have become a part of our daily lives and for real estate professionals, they have become an integral part of the job. These tools allow them to communicate with the customers and tenants quickly and efficiently. They also make it possible to control smart devices and smart houses, for example, being able to monitor and maintain different aspects of a property from afar.
From security alarms to reducing maintenance costs, these devices have become invaluable to the real estate sector. Some properties even come with sensors that can send out alerts to anyone passing by letting them know the property is up for sale. Another important IoT device is the drone, which has been used by many to make recorded tours of properties from the outside in order to share these online.
Virtual Reality (VR)
Virtual reality has become a popular PropTech tool, particularly in the wake of the pandemic as it allows interested parties to take a virtual tour of properties online. This can instantly present customers with appealing properties without them having to make the drive themselves. This can save time and money for both customers and estate agents.
Not only that, but customers and investors overseas or in remote locations can still view properties and process a sale without ever having to attend the actual building or meet the agent in person. So this really has reshaped the industry over the last couple of years.
Why PropTech matters
PropTech is more important now than ever before. These solutions matter to industry professionals and the customers they serve. They enable real estate professionals to manage their properties more easily and allow them to track important metrics like cost, valuation, maintenance and more. On top of that, they can make better use of their time and resources and improve the day-to-day experience of both professionals and customers.
Another reason these tools matter so much is because the world is always evolving. As hybrid working styles grow in popularity, professionals need a way to collaborate with their colleagues in the office whilst working remotely, as well as being able to help their customers no matter where they are.
Believe it or not, PropTech can also play a role in tackling the climate crisis. These tools make it possible to conserve energy within properties, for example, smart homes that automatically adjust lighting, temperature and ventilation based on the requirements of the time. Not only that, but through virtual viewings, there is less need to travel by car, train or even plane to visit a property. This can reduce the carbon footprint of estate agents and buyers. But that’s not all, there are loads of other key benefits to using PropTech.
Learn more: Making a business case for sustainability: why now is the time to act
6 benefits of PropTech
Some of the other key reasons why property technology has accelerated over the last decade include:
1. Improved transparency
Real estate transactions can now be conducted online, allowing for more accurate information and data collection. This can improve transparency, provide data that helps make informed decisions and streamline communication between buyers and sellers.
2. Better collaboration and communication
These tools also help to facilitate better communication between landlords and their tenants, as well as estate agents and their customers. For example, mobile apps make it possible to stay in touch, exchange information and resolve issues quickly.
3. Increased return on investment (ROI)
By giving real estate professionals access to a wider pool of properties, a bigger customer base and the ability to work from anywhere at any time, PropTech can improve value and ROI across the industry.
4. More marketing opportunities
PropTech can also be used to improve promotion and marketing opportunities through websites, email, social media and smart devices. These help real estate businesses to reach a wider audience and give potential buyers a more immersive and impressive experience.
5. Better occupancy rates
Technology has made it far easier to promote and fill vacant properties. This has led to an increase in occupancy and turnover rates.
Plus, PropTech tools help estate agents and landlords to better manage their properties and track transactions, as well as make it easier for people to find them and approach them about renting or buying.
6. A boost in productivity
Lastly, there was a time when real estate transactions were conducted offline and filling out and filing forms was a time-consuming task for everyone involved.
But now, with so much information available online and the ability to conduct transactions from remote locations, real estate professionals have claimed this time back. This allows them to be more productive and to offer better service to their customers.
5 drawbacks of PropTech
Although it’s become apparent that PropTech is having a hugely beneficial impact on the real estate industry, as with everything in life, it’s not without its challenges and it would be remise to ignore these. Some of the drawbacks of PropTech include:
- Thinking beyond installation: Just because you’ve chosen and installed a new system, the work is not over. It’s also important to anticipate how that solution will integrate with other technologies
- Integrating multiple solutions: Similarly, as teams rely on multiple vendor solutions, this increases the complexity of integrating and utilising these different components
- Ongoing costs: As well as the initial cost of purchasing new technology, there is also the ongoing cost of maintenance, repairs and subscriptions
- Too much choice: As the market continues to grow, so does the choice of technology and this can make finding the perfect tools and platforms tricky
- Staying compliant: Managing compliance obligations is a necessity to avoid risks, fines or even prosecution, but big data and multi-vendor solutions can bring about considerable challenges when it comes to staying compliant and protecting your data
Final thoughts
It’s easy to see that the real estate industry has benefited from the power of PropTech since the 1980s and that these tools are vital for both professionals and their customers.
Sure, PropTech is not without its challenges, but these tools could be the solution to wider problems like tackling climate change. They can also be the key to offering the best possible user experience, whilst supporting new societal norms like remote and hybrid working styles.
One thing is for sure, the industry is not slowing down, with new tools and technologies emerging every year. For those in the industry, it’s important to embrace the power of PropTech and make this work for them and their customers.
