You’ve probably heard the word proptech being thrown around recently. And you don’t exactly need to be Sherlock Holmes to figure out it stands for property technology. But that doesn’t exactly tell you what it is, or why it matters for that reason.
Let’s start with what proptech is not. It’s not some nebulous thing that will change everything about real estate, despite what people wearing jeans on stage at various conferences passionately claim. Remember a few years back when this same group was shouting about how fintech was going to render currency obsolete?
Well, I don’t know about you, but I just had to get cash out of an ATM. This isn’t to say there wasn’t a grain of truth to what was said regarding fintech. It is now far easier to pay using QR codes and various apps and we’ve seen advancements in this sector. However, they were not as grandiose as promised.
Similarly, expectations should be tempered when it comes to proptech. While its impact has already been felt, both globally and in Southeast Asia, it’s not going to change everything you knew about property. It will instead support, streamline and augment the industry.
What is proptech?
In a 2018 JLL report, the consultancy described proptech as, “the utilisation of technology as a solution to challenges in the real estate sector. Specifically, technology is used to create or renovate services offered in real estate to buy, sell, rent, develop, market and manage property in a more efficient and effective way.”
Proptech companies can take on many shapes and sizes. For example, Dot Property is a proptech company. In fact, property portals were among the first proptech businesses onto burst on the scene.
Proptech can also involve ways to improve property management or the living experience. For example, Thai developer Sansiri has invested in this type of proptech developing all types of gadgets for use at residential developments. These include the much talked about Sandee robots that deliver packages to residents.
Property buying and the transaction process have also been targeted by proptech firms looking to bring more transparency and flexibility to this area of the industry. BitOfProperty is just one firm working in this space. The company wants to improve international real estate investment while tapping into crowdfunding. It has developed a decentralised, blockchain platform to allow for all of this.
Even co-working is considered to be proptech despite the fact its almost all property and little tech. In fact, it could be the largest single offshoot of proptech at the moment. Look no further than WeWork to see co-working’s importance. The company is among one of a few proptech unicorns that have a valuation of more than USD1 billion.
Why does proptech matter in Southeast Asia?
Proptech obviously has a far-reaching impact on the real estate industry as a whole. From changing how we find and buy property and bringing clarity to the transaction process to improving the buildings we live in, proptech could impact just about everyone although the size and scope may vary. But the bulk of these changes will be incremental improvements, not wholesale revolution.
It should be noted that proptech is much more expansive than this. Everything from Virtual Reality to blockchain and cloud platforms are being leveraged in attempts to revamp just about every single aspect of the real estate industry.
“As more and more processes are digitalised, many established industries are finding that the usual way of doing things has been disrupted,” Anthony Course, JLL Asia Pacific CEO, said. “We believe real estate is next, so it’s vital that advisors, brokers, investors and startups recognise the challenges and opportunities ahead. Data analytics, artificial intelligence, the Internet of Things, virtual reality, blockchain, all of these will change how we invest in and occupy real estate in the future.”
This isn’t the only reason proptech in Southeast Asia matters. The sector is also big business and one that is prime for growth. According to Cento Ventures, a Singapore-based venture capital firm, of the USD14 billion invested in global proptech last year, only USD380 million was committed to Southeast Asia.
And yet, when you scale out to the Asia Pacific region, these numbers increase significantly. JLL found that 179 proptech startups in the Asia Pacific region have raised nearly USD4.8 billion in funding between 2013 and 2017. However, the bulk of the investment went to China.
As JLL noted, Southeast Asia has begun to catch up with both local firms and international investors getting involved. Several Thai developers started their own venture capital arms with the sole focus being on proptech investment. They have combined to commit an estimated USD 100 million to the sector.
The previously mentioned WeWork is also investing heavily in the region. The co-working giant has set aside USD1.4 billion to help expand its reach in China, Japan and the Asia-Pacific region. This includes recently opened spaces in Thailand and Vietnam.
Finally, Proptech matters because it can also find itself pushing the boundaries of local laws. Airbnb continues to be a hot button issue in several Southeast Asian countries because there are no regulations to govern it. In Thailand for example, some government officials claim the service falls under an act covering condo buildings while others believe it should be covered by hotel legislation.
There is also the cautionary tale of Roomorama. The Singapore-based platform was similar to Airbnb but expensive regulatory issues dogged the company for years. Those legal challenges, along with a highly competitive market, forced Roomorama to close its doors in 2017.
This could even be the most interesting impact proptech has in Southeast Asia. As new companies and technologies look to push the envelope and blur lines, will governments be able to quickly adapt to these changes? The ultimate success or failure of proptech in Asia will likely be tied to the answer.