By Manuel Cornejo | Bricksave
November 07, 2023
News > Blog Article > How ‘proptech’ is disrupting the real …
There’s nothing more traditional, or even ‘old-fashioned’, than property. It’s existed as an investment type for centuries, in exactly the same form as it does today, and is perhaps the most physical investment asset there is, because it is almost everywhere you look. But just because property is a physical asset, it doesn’t mean it is beyond the scope of modern technology to make the investment experience more rewarding in every sense. This is where property technology or ‘proptech’ comes in.
Proptech is the broad name given to all of the technological advances that have taken place within the real estate industry in recent years. Just as ‘fintech’ has changed the way most of us use banking and financial services – everything from digital payments to crowdfunding platforms and cryptocurrencies – proptech is reshaping the way that people think about, and interact with, the real estate industry. According to data compiled by Precedent Research, the global proptech market grew to an impressive USD 30 billion in 2022, and is expected to be worth around USD 133 billion by 2032.
Proptech has reshaped many of the traditional real estate investment practices that most people have known throughout their lives, and have refashioned the buying and selling of real estate into something more efficient, accessible and transparent.
For example, if you want to view a property today, you don’t have to go see it for yourself. You don’t even need to be in the same country or time zone! You can arrange a virtual tour that uses 360-degree photography and augmented reality (AR) headsets and apps that let you walk through each and every room in the building, recreated in true-to-life detail. You can even use AR to redesign, reconfigure and remodel the property to suit your purposes.
Finding the right properties to suit your investment criteria has also become significantly easier thanks to proptech. Today, through the use of ‘big data’ and machine learning algorithms, you can gain access to as much information about the property – including its location, local amenities, crime stats and even its potential rental yields – as you need to make a truly informed decision. Whereas once real estate investors were taking a gamble on the true value of a property, the collection of highly accurate data-driven insights are providing real estate investors with a competitive advantage.
And when it comes to proptech in real estate, it’s impossible to ignore the role of blockchain technology and the use of ‘smart contracts’. Using blockchain for title deeds can make property ownership transparent and accessible, reducing fraud and ensuring transactions happen faster.
Smart contracts are self-executing contracts where the agreement between buyer and seller is directly written into code. The contracts and then stored and replicated on the blockchain, and the terms of the contract automatically execute when trigger conditions are met. Crucially, all parties involved can see the terms and conditions of a smart contract. Once set, these conditions cannot be changed without the consensus of all parties, reducing the chances of disputes. Smart contracts are also being used in property rentals, as automated processes can significantly reduce transaction times and associated costs. For example, a rental agreement can be coded as a smart contract which automatically deducts rent from a tenant's account and releases it to the landlord.
Of course, one of the most important aspects of proptech involves crowdfunding. Real estate investing used to be the sole preserve of the already-wealthy, as only they had access to the large capital amounts needed to buy properties outright. But through crowdfunding, anyone can own a real estate portfolio, or a stake in one. Platforms like Bricksave now let individuals invest in real estate projects across the world with relatively small amounts of money. The crowdfunding model has effectively democratized property investment and opened up wealth-building opportunities for individual investors that were previously far beyond their reach.
One of the ways in which proptech and crowdfunding complement each other is how they combine to create a powerful investment ecosystem. One of proptech's most effective uses is the ability to assemble, analyze, and present real estate data in more user-friendly formats. Through crowdfunding platforms which undertake comprehensive due diligence on the properties they present to investors, the investors themselves can gain instant access to deeper insights about property values, projected investment returns, neighbourhood demographics, and much more.
By making all of this information readily available through the crowdfunding platform, it means all potential investors have access to the same information on the available properties, creating a level playing field and ensuring everyone can make informed investment decisions and find the right properties to suit their needs.
It also means that – armed with the necessary information – investors have the freedom and flexibility to invest almost anywhere. They can choose to spread their capital across a broad range of different properties, and they can invest as far beyond their local market as they want to. There’s a whole world of real estate waiting to be accessed via crowdfunding.
Just as ‘fintech’ has revolutionized banking and financial services, but has introduced new risks for investors to consider, the same is also true for proptech and how it relates to real estate crowdfunding.
For example, like all investment markets, the real estate market can be volatile and there are no guarantees that every real estate project or property will prove a successful investment. That’s why crowdfunding platforms encourage investors to diversify their capital across several different real estate projects or property types, thereby spreading the risk.
Also, real estate is still very much a physical asset, even if proptech means it can now be bought and sold digitally. Investors who crowdfund real estate should remember that property can take time to sell, so investors should have a reasonable time horizon before they expect to get their money back. At Bricksave, we are always honest and upfront about the timeframe for each property, and give our platform investors a clear roadmap of when they can expect their capital returned.
But provided the risks are understood, it’s clear that proptech has become a game changer within the real estate investment world, allowing people to pool their resources, gather information and access properties that were previously out of their reach, and offering greater data integrity, efficiency, transparency and flexibility within the global real estate market than ever thought possible before
Investing carries risks, including loss of capital and illiquidity. Please read our Risk Warning before investing.
