The real estate industry seems to be on an accelerating disruption curve highlighted by rapid changes in tenant dynamics, customer demographic shifts, and ever-increasing needs for better and faster data access to allow improved service and amenities. Clearly, cities today are no longer mere aggregations of buildings and people. Moving forward, as the industry prepares for smart cities and mobility, real estate companies seem to have no choice but to be constantly aware of new developments in this demanding ecosystem. River Islands for example have built not just houses but communities (click on www.riverislands.com/homes to find out more).
The last decade has witnessed an exponential growth in real estate tech startups. Globally, the number of real estate tech startups rose from 176 in 2008 to 1,274 by 2017. In the same period, cumulative investments in these startups soared from $2.4 billion to $33.7 billion.
With the emergence of the newest technological advancements and tech-savvy millennials who are now the largest consumer base, the real estate industry is starting to evolve and it’s facing some beneficial changes. Now there are certain key factors that have led to this massive disruption. These catalysts have ensured that the industry takes on a completely different turn and becomes something like never before.
GOING DIGITAL
As technology progresses each year, the real estate industry can no longer rely on just traditional methods to promote properties or meet the expectations of its newest customers. By relocating their business to the digital world, real estate agents not only expand their opportunities, but are also able to reach a broad audience over the internet and reach markets far beyond their local area. Furthermore, 71% of millennials are interested in acquiring a property and real estate agents need to adapt to this needy consumer base. However, millennials would be foolish to ignore the need to contact a conveyancing service before buying a home. There are many Conveyancing Services throughout Geelong.
HUMAN RESOURCES
As real estate and construction (RE&C) companies adapt to today’s dynamic digital environment, they must also confront a unique and challenging talent situation. The workforce is becoming increasingly diverse by generation, gender, and other demographics. At the same time, it is increasingly working side by side with machines in a more hyperconnected and global environment. There is a high potential of shorter shelf-life for many employees’ existing skills. These converging forces of business disruption and talent disruption are creating a perfect storm for RE&C companies.
VIRTUAL SHOWCASING
Virtual reality (VR) technology has been advancing for some years now. Even though many thought that this tech will be used primarily in the gaming industry, it has found its way into the real estate as well. Real estate agents and brokers discovered the benefits of using VR when showcasing properties and it has become quite a popular trend. VR allows agents to display properties in a virtual simulation created by accurate property data.
This eliminates the need for scheduling appointments and having to be physically present for the tour of the property. Potential clients can examine properties from their own homes using only a VR headset. Aside from being able to showcase a single property to a great number of people online at the same time, VR tours expand the reach to international markets as well. That way, foreign clients can view properties in other countries without having to travel there for personal inspection. 3D visuals for property marketing is also growing in popularity for the same reasons. Technology in the real estate world has some fantastic benefits.
CROWDFUNDING
This innovation became fairly popular in the business world, but it has also influenced the real estate industry. Investors saw crowdfunding as a means of investing in real estate ventures of their own choosing, while eliminating the need for a middleman in the process. Investors can now avoid the risks of indirect investments and connect with project managers that suit them best.
On the other hand, thanks to modern technology and online connections, contractors can easily obtain a construction bond to ensure investor’s interest, while guaranteeing that the project will be completed in accordance with regulations. Crowdfunding potential has already begun to reshape the real estate industry and the trend itself may evolve over time. Contractors are able to run crowdfunding campaigns on their websites and secure investments basically with only a few clicks of a mouse. In addition, the capital for a crowdfunding project is increasing and it’s estimated to reach $8.2 billion by 2020.
ARTIFICIAL INTELLIGENCE
The progress of AI technology and machine learning has also reached real estate agents. Real estate agents and brokers are overwhelmed with paperwork, responsibilities and administrative tasks. Moreover, they have to satisfy millennials’ demands and meet their high expectations as well. This entire process takes a lot of time and funds to complete accordingly.
AI technology allows agents and brokers to assess and analyze documentation with speed and efficiency, while extracting essential data and information from tons of paperwork. This shortens the manual process of going through documentation to provide relevant information. In addition, AI technology helps investors make important decisions about construction and housing development.
SMART HOMES
As mentioned before, millennials are quite tech-savvy and they enjoy the benefits of modern technology. The real estate industry closely follows the trend of offering smart homes for purchase or rent to millennial customers. Millennials spend a lot of time online and homes that include smart devices, such as the Internet of Things (IoT), smart appliances, lighting and so on are quite appealing to them.
Real estate agents tend to provide these household items to satisfy their client’s needs when showcasing properties. As a matter of fact, the continuous connectivity that millennials prefer has made a smart home industry quite popular, so much that it’s estimated that the industry will reach $121.73 billion by 2020.
CONSUMER PREFERENCES
Millennials bring significant change to real estate industry with their high expectations and demands. However, these new demands alongside technological innovations are positively influencing the industry. Nowadays, the real estate is facing beneficial changes and more significant growth than ever before thanks to the change in preferences of the new generation.
BIG DATA AND MACHINE LEARNING
Millennials have the highest consumer expectations among all other generations and they’re interested in more than just buying a property. They want to know if the place they want to settle down in has other amenities and possibilities, such as shopping areas, food provisions, walking areas and employment opportunities. That’s why agents have to use big data in order to provide personalized offers based on the clients’ preferences and provide detailed descriptions alongside future area developments.
These technologies are most effective when they work together because AI can be used to process the data through the process of machine learning, identifying new patterns that we might not have seen before. Just imagine how powerful it would be to have advance notice of a trend that will affect house prices such as, if a large number of college graduates are suddenly flooding into the area. This data (and the ability to understand it) could well be the key to success in the real estate industry moving forward. If we’re able to get a comprehensive view of the housing market, we can more accurately react to what’s happening and use data to back decisions instead of simply reacting to things on a hunch.
CHAT BOTS
As artificial intelligence gets better and better at processing natural language, so too will the chat bots that AI powers. In fact, they’re rapidly becoming the new norm across a diverse range of industries thanks to their ability to reduce the amount of time that employees need to use while empowering the consumer to look at what’s on the market and to find answers to simple queries about house prices and availability.
The great thing about chat bots is that they can work around the clock without getting tired, so if nothing else then they can at least provide your business with a more powerful way to process customer queries out of hours. Used correctly, they can even become a key part of your marketing approach, capturing data and generating leads that could go on to become paying customers.
Peer to peer communication
This trend has been going on for several years now and it’s unlikely to stop anytime soon. Thanks to the rise of the internet, discussion forums and social networking sites, it’s never been easier for people to bypass realtors altogether and to make peer-to-peer deals with no middleman. However, this is a big threat to the real estate industry, and many companies are reacting instinctively by trying to limit the amount of data they share about their listings and looking for ways to disrupt the peer-to-peer process. Instead, it’s a smarter idea to focus on the service you offer and adding value to customers’ lives so that even if they could make a peer-to-peer sale, they’d still choose to make the trade through your company.
GLOBALIZATION OF THE REAL ESTATE INDUSTRY
The real estate industry has changed even more due to the convergence of the entire globe. Today it is not just a prospective buyer trying to buy a house on his city’s suburb; rather he might be hunting down a convenient location in a completely different country, take someone living in London and wanting to look into some of the top residential compounds in Cairo for sale as an example, firstly it’s now possible and easier than ever thanks to the internet.
But there are certain things to take into account. Why do some countries receive more inbound real estate investment than others? What drives these cross-border flows – and should some markets be getting more inward investment than they currently do? The world of real estate is globalising. The volume of cross-border transactions has grown by 80% over the past five years, but that increase has been heavily concentrated within a limited number of locations. In fact, the top five countries by capital inflows have typically accounted for well over 60% of total cross-border investment over the decade.
The key risks facing the global economy and the property market are:
Interest rates: Leading economies such as the US, Canada and the UK have already begun raising their policy interest rates, while debate is ongoing over when the euro zone will end its quantitative easing programme. Bond yields for advanced nations are trending higher in anticipation of a higher rate environment – in early May, the Canadian ten-year bond yield reached 2.4%, up from 1.5% a year earlier.
Disruptors are disrupted: China is seeing major cities pivoting from manufacturing to hi-tech, while its people have embraced digital apps. Up until now, US tech firms have led the digital revolution, but Chinese firms are now arriving in the West.
Labour shortages: The risk for the global economy is that firms will struggle to recruit, which could act as a brake on growth. We see firms responding to labour shortages with greater automation, although in the short term there could be upside for property as firms seek better-quality and well-located offices to increase staff retention.
Startups in the Real Estate Industry: It’s not merely the massive real estate companies, startups of the sector are also changing the game. One great example is Airbnb – an app using which you can rent a home. It acts as the perfect substitute of a hotel room and provides you the additional hospitality of actually staying in someone’s home; rather than trying to fit into a make-shift room in a hotel. The app has expanded rapidly over the years and is now present in numerous cities throughout the globe; with an increasing array of customers trying out the peer-to-peer ‘room renting’ facility.
Unfortunately, with backlashes from several governments as well as other real estate cartels, the company has been facing certain speed bumps in their pursuit to growth. But the company has recently adopted to all the policies in their own ways. Currently, Airbnb is piloting a number of tests designed to incentivize landlords and developers in several markets. In 2016, Airbnb launched its Airbnb Friendly Building Program, which lets United States landlords authorize their tenants to sublet on Airbnb, in exchange for a cut of the profits. (Today, an unreleased number of buildings, housing 26,000 units, take part in the sublet program, in return for a cut of between 5 and 15 percent of the host’s profit.) In 2017, the company partnered with a real estate developer to launch Airbnb-branded apartments (“powered by Airbnb”) designed for short-term rentals. By shoring up its relationship with landlords and real estate companies, Airbnb is creating a new class of advocates who, it hopes, will help pressure regulators to make peace with Airbnb.
It’s not just Airbnb, tech giant like Google has also invested on this sector by acquiring Nest. With the help of Google’s cutting-edge technology, Nest has been on a constant pursuit of coming up with new integrated solutions for modern households.
Home, or in other words, shelter has always been a necessity for us humans. However as times have changed not only did the architecture change, but the process of looking for homes have changed as well. Maybe we’re far away from the day when humans will be colonizing other planets, but fully utilizing the space of our houses and living in system-integrated houses is something that we all can look forward to – in any city, in any corner of the world.
