Proptech generates a lot of hype but innovations in software, data, payments and experiential technology could well have the power to improve housing. Investors need to focus on real outcomes instead of buzzwords.
We brought together a leading data company, a payments platform that recently raised $11m in funding and a global real estate adviser to chat about how technology is shaking up residential property.
Proptech’s potential to transform and disrupt the real estate industry lies not in the technology it harnesses but in the solutions it offers, a panel of experts told Property Week on a RESIcast.
However, educating real estate companies about the benefits is crucial if proptech is to be adopted across the industry.
“It will take a little bit of education to gain the trust of people who are currently in the industry. People realise that data can help them make better decisions, so it’s just a case of changing work patterns and work flows to integrate the new forms of work into what we currently do,” says Rupert Parker, head of future proofing at consultancy Avison Young.
Proptech companies providing solutions are gaining traction within the industry. For example, with more and more people renting for longer, finding the money for deposits when looking to move can be a burden.
The average renter in England and Wales has to pay £1,110 for a deposit, according to the Tenancy Deposit Scheme. Delays in getting the previous deposit back can double that amount.
Flatfair, a fintech scale-up founded in 2017 that offers tenants the ability to rent a home with no deposit, already counts among its clients real estate giants Greystar, CBRE, Urban Splash and Places for People.
Franz Doerr, founder and chief executive of Flatfair
Gavriel Merkado, founder and chief executive of REalyse
Rupert Parker, head of futureproofing at Avison Young
“Tenants struggle to move and that’s not just young families and young professionals, but throughout society. The idea with flatfair is really to increase mobility and make it easier and more affordable for tenants to move,” says Franz Doerr, co-founder and chief executive of flatfair.
“When you move into a new place you have to usually put down a massive deposit, which can be thousands of pounds. At flatfair you don’t have to do that anymore, you can effectively secure your tenancy just with your debit card,” he adds.
Flatfair has plans to bolster its operations having raised $11m in Series A funding from Index Ventures, an early investor in Facebook and Deliveroo, alongside the founders of TransfersWise and onefinestay, to expand its payments platform and hire software developers.
Commenting on the deal, Dave Butler, chief executive of the UK Apartment Association said: “There is a huge demand for services and products like deposit replacement that help drive up the level of service and experience for the country’s nine million renters.”
Indeed, institutional owners and investors behind build-to-rent (BTR) schemes are keen on harnessing technology providers such as flatfair to derive granular data that deepens their understanding of the asset.
“One of the big topics is BTR. Lots of companies are getting into BTR and they need to understand what are the levels of affordability, what are the rents that are being charged in the markets for different product types, for different building types, what are the competitors up to,” says Gavriel Merkado, founder and chief executive of REalyse, a big data analytics firm.
“We bring together all that information so then a development company can accurately forecast what is likely to occur if they go ahead and push the button on a particular development project,” he adds.
Doerr agrees: “Absolutely it helps us to provide clients in a big BTR space with a solution that helps them improve tenant retention and tenant quality. It makes their properties much more attractive if they don’t charge tenants a deposit and because that means they can get them in quicker, the property is let much quicker, making that asset more competitive versus other properties in the market.”
One hurdle for proptech firms to overcome to secure wider buy-in from the industry is establishing trust and a track record.
“The biggest problem facing the proptech start-ups is they need to establish trust,” says Parker.
“It’s just become this cloud of confusion I think. As soon as an incumbent in the industry hears proptech they think ‘oh another proptech company.’”
Merkado thinks the larger firms will always be hesitant adopters, but that continuing engagement will eventually win them over.
“It’s just the nature of things, but that’s totally fine, because they need to balance out the risk of getting it wrong with the return of getting it absolutely early enough,” he says.
“There’s a lot of people we’re signing up now that we started conversations with three years ago. You just have to be consistent in talking to them,” Merkado adds.
However, widespread adoption may be closer than many think once trust is established, Doerr believes.
“I feel like every BTR landlord or agent will have a deposit replacement product in their portfolio within the next 12 months. And that is a very interesting development. I believe it will become the new way of things – it just takes time to build this trust.
You can listen to this podcast via iTunes or Spotify, or SoundCloud or listen to it through the player above. This podcast was produced by Blackstock Consulting [www.blackstock.co.uk] founder Andrew Teacher and you can Tweet your views @andrewjteacher and @RESIevent
If you hail from the residential sector or have an interest in mixed-use, you can’t afford to miss the RESI Convention. Join key decision-makers as we look ahead to what the future holds for our ‘Brave New Mixed-up World’ examining the residential sector in the context of the whole property market. Secure your place for 11-13 September 2019 to network, debate and dine over three days at this essential meeting place. Tickets are selling fast.