The real estate industry is simply a goliath. Let me put this into perspective, it is so massive that this one industry contributed to the 2008 recession, bringing the world economy down with it. According to an EY publication, there are 3 primary factors affecting Real Estate: technology, demographics, and globalization. Investors and property developers are jumping on these factors to build sustainable, durable and technologically advanced properties. Technology and digital media have a tremendous impact on real estate. Numerous are its benefits, yet this industry also faces a number of challenges which perhaps we tend to ignore.
A ‘For Sale’ sign is not as effective as it used to be. People expect from realtors easy access to all the information about the property at the touch of a finger. 43% of buyers start the home buying process by looking online. The technology is out there, and offers an array of opportunities for realtors to add value to their customer’s experience. Virtual reality and graphic design can be used to offer clients a 360-degree video experience online. While writing down the closing deal can be done with an electronic signature making the entire buying process digital.
AI will also open door to new opportunities, giving the key industry players the ability to achieve the unattainable in the Real estate industry. We will be able to use AI to speed up and solve complex problems that sellers, brokers, asset managers and investors sometime face notably when it comes to improving efficiency at building homes. AI will be able to contribute and facilitate the decision-making process. Meaning it can potentially provide us with technical solutions on problems at hand, resulting to cost efficiency for real estate transactions.
The Airbnb model provided home owners with a new opportunity with a concept enabling them to diversify the potential streams of revenue they generate from owning homes. The application currently hosts over 7 million listings across the world. The platform cleverly ran a digital and video campaign turning people’s fear of strangers into a selling point. It’s Never A Stranger campaign resulted to a +14% uplift in global brand awareness. Although it can be said that this model has caused an increase in housing prices as it restricts an already scarce market for properties.
Digital media has enabled globalisation and gave the real estate sector a makeover in the process. Realtors’ online marketing and listings made it more accessible for people to know about properties. Notably this created opportunities for new developer around the world in countries to build and market properties with the international clientele in mind. This has been seen in countries such as Dubai, Singapore or Mauritius. Globalization is also pushing forward new investment opportunities with Blockchain where cryptocurrencies can be used in real estate transactions. Its security, transparency and efficiency are what entice buyers, sellers and renters.
Businesses saw the opportunity of moving from a physical to online shops. This can be detrimental for Real estate as it means that more commercial spaces will become vacant. Yet, there is a silver lining to this potential challenge as the expansion of online shopping also implies the need for more local distribution and warehouse facilities. Hence the demand for commercial premises will still be here. Meaning that rather than a complete withdrawal of investment in commercial real estate, people will simply invest in different forms of commercial to achieve respective aims. premises rather than your classic shop on the main street.
Real estate faces challenges when it comes to demographic changes. Between an ageing population and millennials not everyone has the same need. The ageing population considers a number of aspects when investing in a new home for their retirement. We can also expect to see plenty of new kids on the block, tech-savvy millennials who knows what they want, challenging our current residential needs. Planners will need to be more focussed on proactively bringing development forward. While housebuilders will need to find new ways to increase production capacity. Hence technology could be a solution by providing the efficiency required to achieve the respective aims.
Real Estate also faces another challenge when it comes to Urbanisation struggles and mass migration. According to the 2014 World Urbanization Prospects Report, 54 % of the world’s population currently lives in urban areas. This number is forecast to reach 66% globally by 2050 with mass migration towards cities in the Asia Pacific Region. As that migration occurs, challenges of urbanization will need to be addressed. Issues such as the efficient provision of basic services and infrastructure, to the monumental ones, notably the development of smart cities. These challenges will require innovative approaches with a need for cutting-edge technology, real-time data and the most advanced analytic tools.
Technology and digital media are a two-faced coin bringing challenges along with its benefits. The obvious one being the increasing monetary costs. Investment in digital media would mean high advertising cost online for realtors and property developers. And these lumps sums will not be recoverable as one takes the risks of having a failed advertising campaign and reach the wrong category of people on the market. Notably, new technologies and machine learning software often come with high maintenance costs. Although it should be noted that on the very long run these cost decreases as the benefits outweighs its drawbacks.
Andy Pyle, UK head of real estate at KPMG, was right to say that “Real estate may be an industry deep-rooted in bricks and mortar, but it’s far from immune where digital disruption is concerned. It’s clear that the industry’s key players are slowly but steadily waking up to this fact.” The next phase for this sector’s transformation, is the need for different actors within the industry to understand and integrate the latest in technological innovation in order to meet consumer demand of sustainable housing and maintain investment returns. Forget location, the new battleground in real estate, is technology.