COMMENT: George Bernard Shaw once said: “Progress is impossible without change, and those who cannot change their minds cannot change anything.” It appears that many of the established firms and leaders in the property sector are starting to “change their mind” about proptech, writes founder and chairman of Pi Labs and chief executive of Spire Ventures, Faisal Butt.
Their sentiment toward the proptech challengers seems to be morphing from “Who are these cowboys?” to “Let’s send them a friend request”.
People often ask me where proptech disruption will come from. Depending on who’s asking, the question often arises from some deep-rooted emotion; either it’s fear of some unknown disrupting force, or a burning desire to capture the next big opportunity in the sector.
Without concocting some exotic fantasy of the future with floating warehouses and flying cars, my answer is actually quite mechanical and dispassionate (and some would say, plain boring). My vision for the near future is that the end-to-end property transaction process is up for grabs. If one were to make a flowchart of a property transaction’s processes from start to finish, every node in that transactional flow now has or will soon have a digital challenger plucking away, trying to do that piece better. And the challengers will be looking to not only make it a teeny bit better, they are targeting step-change improvement, and in some cases, a complete transformation, of the existing way of doing things.
From originating opportunities through to legal closing, there are a number of complex steps in completing a property transaction, and the process, as our industry’s dealmakers can attest, can be a gruelling couple of months. Thankfully, things are about to change.
Imagine a world in which you originated assets using an app (based on your profile, social network, prior track record, and investment criteria), conducted your underwriting and DD on one easy-to-use platform, got a valuation done from within the platform, selected and instructed consultants with a few Tinder-like swipes, and submitted and monitored your offer with the click of a button. This reality is not far off, as start-ups such as LandInsight enable investors to find and acquire off-market properties using cutting-edge data science technology.
Those that raise equity and debt for their transactions, either in a fund or in SPVs, will agree that the dark art of capital raising could certainly be lightened up with the helping hand of tech. At the smaller end usually traversed by individual and family office investors, numerous peer-to-peer equity and debt platforms have emerged to allow people to raise the finance they need to transact. Companies such as Trussle are making procuring a residential mortgage a lot easier by offering a “smarter” mortgage brokerage service, and others such as Property Partner allow retail investors to club together in a residential buy-to-let purchase.
At the larger more institutional and commercial end, technology is less likely to have a more immediate impact, but if history is anything to go by, disruption often starts at the less sophisticated end and then moves up the value chain. Think how retail-investor focused Wealthfront and Nutmeg are causing ripples in the mainstream wealth management industry.
While the peer-to-peer and crowd-funding space for property financing is itself getting crowded, no player seems to have achieved the volume and liquidity to rise among the pack as a clear winner. My eyes remain peeled for the market leader that has yet to emerge.
With proptech set to overhaul all the pre-closing steps in a property transaction, the legal conveyancing and closing are not likely to be spared. Already, in the residential sector, a number of start-ups have emerged this year to tackle the cross-section of proptech and legaltech, a niche which could very well define the next arms race in the residential proptech space, with commercial legal conveyancing soon to follow. Some of these entrepreneurs are dreaming big with bold visions of “two-day conveyancing”, something unfathomable today but perhaps possible soon by harnessing new technologies like blockchain.
The good news is that each stage of the property sale and purchase process will, over time, be digitised, and as this transformation occurs, end-to-end transaction timeframes will be slashed by at least a third, and perhaps even by half. The impact of property changing hands faster on the sector at large is outside the scope of this article, but deserves to be covered in a soon-to-be-released sequel.
Proptech start-ups have so far enjoyed most of the limelight as the harbingers of change in the property industry. But we need to give more credit to the industry’s incumbents for changing their mind – something that is not easy for them (think of the analogy of the oil tanker changing course). Savills’ and LSL’s recent investments in Yopa, and CBRE’s investment in Fifth Wall, define a turning point for the status quo thinking in corporate boardrooms. If Shaw’s wisdom on changing minds is anything to go by, this bodes well for the industry and suggests we may be set for a period of long-term, transformational change, sparked by the start-ups, but subsidised by the titans.
■ Pi Labs, with CBRE and KPMG is partnering with EG on its inaugural TechTalk Academy. Entries for the competition, which includes up to £150,000 of investment from Pi Labs, a year of mentoring and coverage in EG and access to our wide audience, are now closed. However, tickets to attend the event, which includes a keynote from Facebook’s head of real estate, Rob Cookson, are now available to buy at www.egevents.co.uk/techtalkacademy2017
