Is the property market going digital? Market analysts are reporting on the rise of ‘proptech’; the digital start-ups and scale-ups that many say are replacing the physical, human side of the business - the bricks and mortar estate agents, the thousands of property service providers and the human relationships at the heart of dealing, negotiating and property management.
In our view the real question is ‘what do customers really need and value from us that cannot be replaced by technology?’ The answer to this is ‘quite a lot.’ And what’s more, changes in the market, especially on the compliance side, are actually adding to the level of human involvement required.
Disruptive innovation in the property market
The ‘digital disruption’ of the property market is already well under way and gathering momentum, with the rise of the online agency and peer-to-peer transactions. Serious investors are attracted by the added profitability digital business models can offer - lower operating costs generated by automation, better workflow efficiency and higher transaction speeds. Online rising star Purple Bricks has just raised £50m to break into the US market, a bold move, hot on the heels of last year’s foray into Australia. The Solihull-based agent, which currently has around 2% of UK property listings and is yet to turn a profit, has a £560m market capitalisation, more than Countrywide and Connells combined.
How the shift to digital impacts landlords and tenants
At College and County, we see digital technology as a clear opportunity to reduce fees as automation develops sufficiently, and this is happening, especially on the transactional side: Walk-through, 360° viewings are here and getting more sophisticated. Software now handles all the referencing and contractual work, and thanks to the Internet, customers have a much wider range of choices around how they move, from Assured Shorthold Tenancies and holiday lets to serviced lets and Airbnb.
But these significant improvements are being offset by the rise of more complex tasks on the compliance side, driven by more Central Government and Local Authority engagement with the Private Rented Sector (PRS). As a result, much of the time our team saves on automated tasks is being eaten up by having to spend more time on compliance.
This is why: fifteen years ago, people in property management would comfortably look after 180 properties. They would handle gas safety certification, voluntary licensing of some HMOs, maintenance reporting, renewing agreements and serving notices. Now the plethora of new compliance requirements to stay on top of: Statutory and Additional Licensing of HMOs, compliance with HHSRS, Legionella and fire risk assessments, CO, smoke and heat detection systems are being followed up with incoming energy performance and electrical safety certification. All of this means that the maximum amount of properties a property manager can now handle has reduced to 120.
Against this backdrop, what do our customers need and value?
Our landlords still want a relationship with someone they trust to look after their investment. They want the best possible tenants for their property, they want repairs done by the best contractors at best value, and they want total confidence that as landlords they are totally compliant. Our applicant and tenant customers want fast response times and to be kept fully informed. They often need help to understand complex contractual obligations, and they need assurance that their landlord is fully compliant too.
There is no doubt that technology will continue to drive change in the property market, however in my view, the one element that will be constant is people. As a service provider, it is our job (and how we stay in business) to accommodate our customers’ needs and deliver value. The jobs may change, there may be fewer (or even more of them in some cases). But we will always need good people , well trained and willing to go that extra mile for our customers.
Should the real estate industry fear proptech ? Property Week, November 2016
Online estate agency Purplebricks targets US , FT, Feb 23, 2017