Report: Why proptech will accelerate in Asia

Image credit: Pixabay.

Proptech – the use of technology to solve challenges in the real estate sector – is on the rise, and startups focusing on these technologies are entering a space dominated by large incumbents.

According to proprietary data from global real estate services firm JLL and Tech in Asia‘s research, growing smartphone penetration in Asia, rapid urbanization, and government support are set to thoroughly shake up the region’s real estate industry.

In fact, proptech startups in Asia have received around 60 percent of the over US$7.8 billion invested in proptech worldwide since 2013.

Here are five reasons why this fledgling sector will accelerate in Asia:

1. The rise of new verticals in proptech, such as VR and blockchain

The swift expansion of proptech startups means they will also compete for listings and views. To increase the attractiveness of their platforms, companies will begin to offer value-added services by using new technologies such as virtual property viewing. Imagine walking into a showroom and viewing 10 properties in one go – but without the footwork. This not only saves clients time but also opens up more possibilities for landlords and sellers.

Another buzzword is blockchain, which is often used interchangeably with cryptocurrencies. But in fact, it holds much more potential beyond bitcoin payments and remittance. Together with bitcoin, ethereum can perform “smart contracts” – contracts that help you exchange money, property, shares, or anything of value in a transparent way while minimizing human involvement in agreement verification. This will significantly alter the ways of doing business in real estate.

Image credit: Pixabay.

2. Digitization of existing proptech verticals

At present, the majority of proptech startups in Asia Pacific operate in the vertical of brokerage and leasing. They serve as the channel or marketplace for brokers, property owners, and purchasers, primarily focusing on residential property. The most common ones are list and search startups, such as Singapore’s PropertyGuru, which are effectively online classifieds platforms that combine search engines with brokers’ listings.

As these marketplaces become more mature, they will expand into processes that support brokerage and rentals. These include sales, marketing, and customer relationship management (CRM) tools for brokers and coworking operators.

3. Growth of smart cities

Initiatives for “smart cities” are being implemented all over the world, and Asia-Pacific countries are at the forefront of this trend. As they seek solutions to key issues arising from rapid urbanization, these cities are embracing change and turning to non-traditional options. A total of US$63.4 billion has been earmarked for investment in smart city technology in Asia Pacific.

The evolution of smart cities would prompt the need for smart-property development and management. The data-driven nature of smart cities means that extensive data collection and analysis are necessary to fully realize the benefits of an interconnected ecosystem.

Proptech startups specializing in areas such as IoT and big data can help real estate players – as well as government agencies – transform their operating models and make more informed decisions.

Image credit: Pixabay.

4. Increased number of startups and corporates interested in proptech

In recent years, an increasing number of funds fully dedicated to proptech have been introduced. Real estate incumbents have recognized the value and potential of proptech and are helping to accelerate its growth via corporate venture capital.

One example is Australia’s Esho Ventures, a fund that focuses on the landlord-tenant relationship, construction technology, and the impact of millennial lifestyles on the real estate market.

Established incumbents are also getting more involved in the startup community as they realize its usefulness in keeping up with proptech developments. In June 2016, Singapore’s leading property developer CapitaLand announced that it is setting up a US$81 million startup fund. Hood Disrupt, the region’s first proptech hackathon, was held in August 2017, with 60 participants making up 17 teams, including students, brokers, entrepreneurs, IT professionals, and lecturers from countries as far as Poland.

5. What millennials want, they get

The age of the digital native is here, and a whopping 60 percent of the global millennial population resides in Asia.

With rapid urbanization happening across the region, these tech-savvy youths are gaining more purchasing power as they come of age. Shaped by their childhood experience with technology, millennials are used to getting information when and how they want it.

While proptech is more established in Europe and North America, the Asia-Pacific region holds much promise for innovation and adoption. Even though consumer preference for offline channels and tools initially served as an impediment to proptech, we can expect the millennials’ natural affinity with all things digital to be one of the strongest drivers of change in this sector.

To find out more about how proptech startups are bringing real estate in Asia beyond the brick and mortar, download this report brought to you by JLL and Tech in Asia.

Converted from Singaporean dollars. Rate: S$1 = US$0.74.