COVID-19: the rise of the proptech
A rapid takeup of property technology platforms during the early stages of the COVID-19 outbreak provided a modern-day illustration of Albert Einstein’s famous philosophy that in every crisis, there is opportunity.
Momentum in Australia’s proptech sector had been building prior to the pandemic, with top agencies utilising technology platforms to streamline administration and reduce manual processing, or enhance property presentation by providing 360 degree photos, video tours and aerial photography.
Macquarie Group's Real Estate Pulse Check, released prior to COVID-19, revealed that Australia’s best performing agencies were more likely to have considered the widest range of technology available, from management systems and back office automation to artificial intelligence and data analytics.
“If you look at the data the pulse check provided, the top performing agencies weren’t necessarily using more technology than other agencies, but they were using it much more consistently and they were executing on changing their systems to adapt that technology much better,” Macquarie Group division director Dan Evans told a recent panel discussion hosted by the Proptech Association of Australia.
“So there was a real productivity benefit from the systems they had in place, they weren’t necessarily just relying on the addition of technology."
When COVID-19 hit, Australia’s proptech sector went into high gear, as strict social distancing requirements shut down home opens and auctions and the number of transactions slowed to crawl, with little action in the market from both buyers and sellers.
Proptech developers took the opportunity to launch an array of innovative new products in an effort to keep the market going, with solutions to holding an auction among the first to come under hot demand.
While not necessarily a brand new technology, online auction sites became a necessity during lockdown, providing an avenue to market while people could not gather in groups.
But while some of Australia’s biggest real estate agency networks live-streamed thousands of auctions on platforms such as Zoom, Auction Now, GAVL or Facebook Live, some experts are skeptical the online shift will be a lasting trend post-pandemic.
Venture capital firm Pielab Capital’s managing director, Chris Rolls, told the Proptech Association panel that while COVID-19 shone a spotlight on online auction platforms, he was not seeking to add any to his company’s portfolio of investments.
“Over the years we have looked at multiple online auction proptech businesses, it’s a space that we took a view as one that was going to not be successful,” Mr Rolls said.
“And to date, we haven’t seen any of those businesses get significant scale, although there is no question they did have an uptake over coronavirus.
“The big question is what’s going to happen once everything goes back to normal.
“This whole idea of people not having to turn up at an auction almost flies in the face of what a real estate agent actually wants, so therefore rolling out the tech in that space has been difficult.”
While agents were scrambling for solutions to ensure properties were transacting, Mr Rolls said not all proptech platforms enjoyed an uplift in sales activity during lockdown, with many real estate players looking to cut costs in the early stages of the pandemic.
“I know many people in the real estate industry went through a process of identifying what is necessary and what’s not,” he said.
“As part of that, one of the things that tends to happen in all businesses, not just in the real estate industry, is that subscriptions to software products that seemed like a good idea at the time start to mount and then there is an exercise of cost cutting, and all of a sudden they start to get switched off.
Proptech businesses among those that did experience a sharp lift in sales during the pandemic were platforms designed around virtual inspections.
One of the first movers was Realm Australia, which launched its property self-inspection app on March 24, allowing property managers to continue to conduct their normal business functions such as routine rent inspections while physically distancing from tenants and landlords.
Proptech firm Valocity also got on board in May, launching a property valuation app to remotely inspect and value properties.
The Valocity Connect app enabled occupiers to take and share time-stamped, geo-location validated photos of properties, to provide evidence of its condition and features without the need for a physical inspection.
Another technology solution launched mid-pandemic was Rent Ready, a pay later solution for landlords developed by ASX-listed fintech company Money Me.
Money Me chief executive Clayton Howes said the Rent Ready platform was designed to give landlords a low-touch toolkit to better manage the capital requirements for an investment property by giving them a line of credit in line with around three months’ of rental income, up to $15,000.
The line of credit can be used to facilitate routine maintenance or replacement of appliances such as dishwashers or water heaters, with repayments spread over 24 months and taken out of the rental income.
“The landlord never has to put their hand in their pocket to pay for the maintenance and management of their property,” Mr Howes told Australian Property Investor Magazine.
Rent Ready, which was launched in early June, also allows landlords to draw on that line of credit to make up for shortfalls in rental payments, a feature that was particularly attractive for investors with tenants whose income had been impacted by the crisis.
Mr Howes said Money Me had been working on the concept prior to the pandemic, but had accelerated its development because of the opportunity to relieve some of the financial stress facing landlords across the country.
“We felt like we had a responsibility to work around the clock and we had our development teams working literally 24/7 to launch Rent Ready on time, and we’ve launched it with the ability for landlords and renters to maintain their relationship.
“It doesn’t matter if the renter is deferring repayments, the landlord still gets paid and they are putting it on these rental terms.”
Mr Howes said while the growth of Rent Ready had already surpassed company expectations by targeting property managers in its launch phase, he believed significant growth would come from attracting investors with self-managed portfolios.
“We see a massive opportunity to deliver mobile automation and really clever finance management tools for landlords and property managers, and also vendors who are selling properties,” he said.
“It is interesting how it is such a wide open space that’s been untouched and was right there for us.
“Banks have been providing mortgages, but there is so much more to managing a property than just the onset of debt being the mortgage.
“We’ve seen Zip and Afterpay doing a good job in retail, now we are doing a great job in property.”
Also kicking goals during COVID-19 was proptech startup :Different, which raised $7.1 million in May to fund a national expansion of its property management offering, a capital raising that featured investments from PieLab, AirTree, Spring Capital and Tim Roberts’ Warburton Group.
:Different aims to be an assistant for the home, providing a better experience for owners and renters by providing a portal to raise maintenance issues and perform inspections.
Co-founder Mina Radhakrishnan said the funds would help the company grow its team, invest in its technology and expand operations to Perth and Canberra.
Warburton Group chief executive Darren Weaver said the company’s investment in :Different reflected the significant opportunity to disrupt property management in Australia, while Spring Capital Michael Chen said he was also attracted by the new way of performing traditional tasks.
“:Different’s approach to solving the low efficiency and high cost paradigm caused by the fragmented local agency model, which has existed for decades, impressed me, which encouraged me to invest in the company,” Mr Chen said.