Britain’s Property Technology Sector Struggles to Shake Up Housing Industry

The property technology sector of the United Kingdom has irrefutably seen considerable growth over the past 18 months. In June 2014, the property portal Zoopla listed for approximately £1 billion. Since then we have seen the launch of a startup accelerator committed to early stage property businesses and a large sum of capital invested into undeveloped companies which directly or indirectly relate to the property market.

“Property tech” has never been talked about so often. Seedcamp, the company that provides startups with seed money, mentorship, office space and support, welcomed new businesses to its programme in September – that includes property tech startups GetAgent, Splittable and Trussle. Homeshift and Property Partner are also among the sites that provide tools needed to facilitate in the property acquisition process. Homeshift enables people to connect with service providers and take control of their household services. While Property Partner is an online property investment platform that allows people to choose from properties all over UK.

There are a few macro trends that are worth exploring in depth.

One of these is the challenge to estate agents, led by online property marketplaces like Purplebricks and eMoov. These businesses distinguish by challenging the estate agents’ commission of approximately 3 percent and by playing on the very different role estate agents have today compared to a few years ago.

Reducing customer trust issues and the economics of customer acquisition is a concern for online estate agents. However, it is claiming that eMoov has sold over £1 billion in properties and saves its customers on average £4,200 per transaction.

The automation of previously offline and labour intensive services – home removals − is the second key trend. Homeshift and Buzzmove are changing a segment which has been slow to embrace technology, serviced by a number of middle-men and agents. When you consider the operational sector of removals and the need for in-person visits, it becomes obvious that there are significant operational efficacies to be considered.

The same is true for tools that provide a means so that landlords can manage their inventory in a smoother manner. Platforms such as Fixflo modernize the communication process between landlord, tenant, agent and tradesmen. For instance, fixing faulty wiring in a flat needs multiple steps such as receiving quotations, informing agents and complaining to landlords, they can now be consolidated.

Probably one of the most interesting trends within property tech is the emergence of platforms which enable access to property as an investment asset class. While crowdfunding and peer to peer lending platforms like Crowdcube and Funding Circle have allowed investors to incorporate higher-risk equity and debt assets into their portfolio, there has not been a way to gain exposure to the property market without a substantial capital outlay.

Now, businesses such as Property Partner are opening up previously unreachable asset modules to smaller retail investors who lack the capital amount required for buying property directly.

Other features of the property industry are motivating the growth of property tech. With the exclusion of fashion retailers and fishmongers, for example, there are less industries where shop-front advertising is still a means of getting customers.

In 2014, 1.219 million properties were sold in the United Kingdom at an average sale price of £248,000. Assuming an average estate agency fee of 1.6 per cent of the total sale price, this would value the UK estate agency market at over £3 billion per annum. Then consider that the average removals service costs from £500 (for a small flat) to £2,000 (for a five bedroomed house), and there are spaces between the market where there is an opportunity for consumers and agents to make substantial savings. Correspondingly, given the pressure that “old world” property businesses will most probably experience, there is an equally thrilling opportunity to simplify their transition into the new landscape – one with lower fees but more significant use of technology and the internet to obtain customers and manage workflow.

In contrast to many European countries, the UK’s outlook of property ownership is closely aligned with social status – their citizens are more likely to talk about “homes” rather than just property. This is most significant when considering whether the value chain can be completely digitised in the same way as booking a holiday has been.

This sluggishness is less strongly felt, though, in the rental market. When observing the growth of Uniplaces (an Octopus portfolio company), Rentify or even Airbnb, it would seem that many of these services have not been restrained by the issues that the freehold market seems to be affected by. This could be caused by the higher turnover of residents, the more restricted downside of a poor deal, the average age of tenants, or the fact that the landlord and tenant model has always involved outsourcing to an intermediary.

The progression of property tech is becoming pretty obvious. This is a remarkable area of development, and one that touches many people, even outside the typical realm of technology, and is definitely one to lookout.

A growing trend therefore is being witnessed and experienced with crowdfunding and peer to peer lending platforms and firms and this will only grow as new taxation and UK legalisation gains traction making more traditional property transactions and landlord management activities more onerous.

If you are look for a way to diversify and invest still in property without the hassle and gripes landlords are losing concerns int he market place today, then Stratosphere peer to peer lending might be the ticket.

Remember, like with any investment opportunity your capital maybe at risk and care should taken before you invest anyway and strongly recommend talking a qualified consultant or IFA (independent financial advisor).