If the property news zeitgeist is to be believed the London property market is not doing too well, uncertainty over Brexit increased taxes, and overvaluations have created the perfect storm, which has caused the market to slow for most of 2018. During 2017, there was a lot of noise in the media about a PropTech revolution and its implications on the property industry, which has been viewed as being slow to innovations.
As property and tech continue to merge we should ask whether these changes can bring about a shift in the fortunes of the London market or whether innovations can compound market difficulties.
Let’s look at some of the developments in Proptech and how this might affect the London market:
The ability to raise money online and reach new investors through online crowdfunding and investment portals still amounts to “small beer” when considerating the size of the London market. Although a long way from filling the gap left by reduced foreign investment as a result of Brexit uncertainty this market continues to grow at a fantastic rate. As more new tax-efficient products like property ISA’s are created offering good returns, there is an opportunity for UK based investors to benefit as the market adjusts.
Also AI and data-driven recommendations are turning property investing more to a similar “stock” based investments.
Proptech has allowed data and automation to be built into the operational parts of property investment. It will be simple make a buying and selling decisions and monitor your investment’s performance, all from the comfort of your sofa. Another bonus is that in that past property investment had prohibitively high minimum investment amounts preventing most people from being able to benefit from its growth, using crowdfunding consumers can invest a little as £100 creating a whole new market for property developers to secure funding.
The most significant thing at present in Fin-tech is blockchain and its applications. Property is a notoriously and annoyingly imperfect market.
Transaction costs are high and take a long time, the blockchain can solve this through the creation of smart contracts that can drive significant transparency, efficiency and cost savings.
Until well into the mid 90’s property valuation in both the residential and commercial sector was at times more of alchemy than science. With new data-driven technology, commercial and residential property professionals can automatically obtain the most relevant comparable properties prices based on their similarity to the subject property (factoring for year built, number of units, amenities and proximity).
Any charted surveyor will tell you this will save hours of tedious work, increase savings, and may uncover some under/overvalued areas of the capital along the way.
Greater transparency can be used to drive investment decisions rather than the headlines. In the past, too many investors make decisions based on blogs writing on the “5 Areas of London Where Millennials Are Moving” which often create localised property bubbles.
The application of tech within the London market will open new investment streams and offer, in time greater diversification of investment sources. This is a good thing as the London market has overly reliant on overseas investment for too long.
Even taking into consideration the excellent growth of tech-focused property investment platforms, they are still a long way from filling the investment gap. Alongside this, Tech can also create considerable savings in conveyancing, transactional costs and law although it is unlikely that however big these savings that they offset some of the more fundamental issues that the market is facing.
The traditional ten-year cycle of boom and bust within property prices that London has experienced in the previous three decades was held off in 2007 by foreign investment and continued cheap lending.
One surprising side effect of the finical crises resulted in investors looking for safe investment in safe places, (such as bricks and mortar in London). This has led to overvaluation in some areas of the city, and as smart data and AI focus in on the London property market, these overvaluations could lead to a price correction.
Although Tech will not save London from this period of difficulty the way in which the industry operates as a result of tech will have changed the industry dramatically by the time it passes, and some of the solutions it offers may stop these problems arising in the future.
Where you will see the application of Tech turn to profit within property over the next couple of years will be around the rest of the UK. London will have to wait until it sorts itself out.
Fred Bristol is CEO and Founder of Brickowner – a property investment platform that works with established developers to offer consumers access to exclusive high return property investments they would otherwise not be able to invest in.