Founder & CEO at CM Square, a company delivering PropTech and AI services for Asia’s customers.
We are all living in a new normal now due to a pandemic that no one could have foreseen or expected how it changed our lives and the way we interact with other people. There could be changes that last forever, preventing a return to facets of our previous lifestyle. These changes can be in every aspect of our world, including personal lives, corporations, businesses, investments and, without a doubt, the real estate industry.
A recent survey of business executives by McKinsey found that digital and technology adoption is taking place at a rate about 25 times faster than before the crisis. We can expect that the use of technology in real estate markets will become more popular in every area from sourcing decent deals to automated valuation to digital cross-border transactions to property management.
Asia Has Great Market Potential
Looking at the adoption speed here in Asia, it’s apparent to me that it is lagging behind as compared to Europe and the United States. We can look to leading examples of proptech in areas outside Asia — for example, HouseCanary’s work on property valuation through AI, or the way Opendoor, Zillow and Redfin are speeding up the iBuyer model. However, you come up short when looking to name major players in Asia that are at the forefront of technology innovation in the real estate industry. It revealed a huge gap between the post-pandemic demands of proptech and companies that can provide such services.
The Essentials Are There
Is it because the infrastructure in Asia is not ready for proptech development? My answer is no. In major locations like Hong Kong, Singapore, Taiwan, Japan and Korea, the governments have been advocating comprehensive real estate transaction records as part of the regulatory requirements, which have essentially built up a strong database that is a prerequisite for almost all property technologies related to transaction information. Moreover, there is a very active brokerage and agency ecosystem that grants access to tons of unofficial and unstructured data, which can be leveraged for research and analysis. So the essentials are ready, and I am happy to see proptech is starting to heat up in Asia recently.
There are two areas where I see great potential for proptech innovation in Asia.
First is the use of AI for instant property valuations and rent estimations, keeping track of the changes in the property conditions itself, changes in the economic climate and differences in other factors such as mortgage rate changes or population movements. Putting an active listing in the public market and conducting instant valuations would help investors identify high-value deals quickly, and it should also help private equity investors, banks, insurance companies and mortgage lenders to generate valuation reports and underwrite quickly. Surprisingly, it seems market players in Asia have yet to realize that the readiness of data creates such a good opportunity.
Second is the use of blockchain to facilitate digital transactions via smart contracts. In our new normal with reduced travel and interpersonal interactions, the real estate transaction volume is driven down. Therefore, developers, brokers, agencies, banks and mortgage lenders should be keen to push as many digital transactions as possible. However, the adoption of blockchain is affected by a large number of scams circulating around blockchain projects. I suspect the situation will improve in the near future since leading traditional real estate developers, such as New World Development in Hong Kong, are catching up and launching a blockchain property transaction platform. And in Taiwan, the government is also actively improving the information quality of its property transaction system to lay an excellent foundation for proptech development.
Tap Into This Market Quickly
For those who want to seize this market opportunity, I would suggest breaking down your adoption roadmap into milestones. It is an ideal scenario that you disrupt the local players and the ecosystem in one go, but most of the time you need to work with them or partner with them and I believe it makes for the fastest way to grow your business. Real estate is a traditional industry that is well-regulated, so we can’t expect to change everything overnight, especially in the Asian market. But if you are interested in the Asia proptech market, it is time to find a seasoned and trustworthy partner with strong technology know-how to work with you to tap into this market quickly.