Latest technologies are infiltrating various business spheres and real estate sector is not an exception in that sense. A new term – PropTech (Property technology) has entered into circulation along with innovative solutions by retail startups.

Business portal Rusbase has explained the new notion and we have selected the most noteworthy parts of the article for your consideration.

What is PropTech?

The term has multiple definitions. The most popular one has been given by Atlas International’s director James Dearsley:

“PropTech is one small part of a wider digital transformation in the property industry. It is a drastically new approach to buying, maintaining and managing property.”

This concept covers a wide spectrum of the real estate sector. Here we are talking about the commercial side of the industry as well as the construction side, and even about the buildings and cities of the future. Many have attempted to provide a plain and clear definition of PropTech, for instance:

“It’s a collective term used to define startups offering technologically innovative products or new business models for the real estate markets.”

PropTech has several growing vertical at the moment: the real estate market per se (PropTech), smart cities and buildings, the sharing economy, the home building industry (ConTech) and finance (FinTech). The latter two are very closely tied with the property industry.

Startups

The majority of startups can be assigned to these two categories:

- Startups offering real estate professionals the tools to enhance their services or productivity;

- Startups proposing to replace real estate professionals.

Real estate startups have long been attracting investment. In particular, the volume of venture investments in PropTech starting from 2012 made about USD 6.5 billion with 800 startups appearing around the world over that time.

Nevertheless, since 2014 the sector has been experiencing strong growth: the first PropTech startup valued at over USD 1 billion was founded in 2016. And three more followed in its footsteps the same year.

The majority of companies combine several technological solutions. For instance, Opendoor startup purchases property online directly from homeowners and at a price set by a proprietary algorithm driven by Big Data. After calling in a specialized team to renovate and upgrade the property, it then puts it back on the market, using connected locks and cameras to enable self-guided visits from prospective homebuyers. The participation of the company’s employee isn’t required, and the code is sent via the app.


What should traditional players expect?

With the development of the internet, real estate agencies lost their monopoly for providing information about offers on the market. In Britain, online real estate brokers have captured 5% of the market and analysts estimate that they might reach 15 to 20% by 2020.

It’s said that banks don’t bother about Fintech startups on the market, as they still make a lot of money. Back in the day, Universal, Kodak, and the taxi industry too had quite a bit of cash at hand to fight the new companies on the block. But the problem is not in money. Business models are being reevaluated, consumers’ needs are evolving. Newcomers are able to dig deep and analyze these changes to offer better solutions and improved customer experiences. Ultimately, they’ll come out ahead.

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