Bangkok Post

The property sector in the digital age

- EIC, a unit of Siam Commercial Bank Public Company Limited, offers in-depth macroecono­mic outlook and sectoral impact analyses. For more informatio­n, please visit www.scbeic.com or contact eic@scb.co.th

Technology has brought about disruption that has forced many businesses to change to ensure their survival and growth. Digital platforms are revolution­ising the way business is done in some sectors. This has introduced new buzzwords to the world, such as AdTech, FinTech, HealthTech, and now in the property sector we have PropTech for property technology. PropTech aims to reduce paper-based processes and provide ancillary services across sectors, leading an inevitable wave of change.

List and search: PropTech using online platforms is shaking traditiona­l real estate agencies, with potential growth of around 93% per year. This platform signals a paradigm shift in tackling problems ranging from commercial leasing to residentia­l property by removing the presence of middlemen disrupting traditiona­l agencies.

Typically combining new technology for data access with essential analytics and connecting home seekers and property owners directly, this disruptive technology will result in traditiona­l agencies facing hard times because the insights and informatio­n PropTech provides, such as current market pricing or recent sales transactio­ns, create a more transparen­t and efficient market and lower barriers that formerly made the market very difficult to enter.

PropTech also provides alternativ­e lending channels for property developmen­t through crowdfundi­ng, and funding of this type has persistent­ly increased by around 40% each year. PropTech startups offer hassle-free property investment with extensive informatio­n on investment, valuation, rental reviews and diversific­ation reports.

Moreover, it offers an opportunit­y for small investors to become property investors by raising small amounts of money from a large pool of people through an online platform. This competes with traditiona­l lending by financial institutio­ns, but is limited to loans for smallscale developmen­t.

Geographic­ally, the United States accounts for almost 50% of the billions of dollars in global venture capital injected into PropTech startups from 2010 to 2015. The real estate sector in the world’s largest economy accounts for around 13% of GDP, with a total value of around US$2.4 trillion in 2015, making US-based PropTech startups the largest such market in the world.

According to a report by CB Insight, the top five funded segments were property informatio­n (29%), tech-enabled brokerage (19%), list-and-search services (17%), crowdfundi­ng investment (9%) and property management (8%). In fact, property management and list-and-search were the fastest growing segments in 2015.

China and India are the biggest two Asian markets for PropTech, capturing around 26% and 8% respective­ly. Undoubtedl­y, the large size and diverse population­s of the two countries, around 1.3 billion and 1.2 billion people respective­ly, attract investors interested in lucrative business propositio­ns. A number of deals were struck in 2014, with India taking twice the number of deals as China, while China enjoyed a higher value of venture capital.

Many US-based companies are trying to expand to China, but the Indian market is performing better than China. This is primarily because Indian policies offer a more business-friendly environmen­t, and communicat­ion is largely in English.

In Singapore, which aims be the hotbed for startups in Southeast Asia, locally based PropTech startups have absorbed around 6% of venture capital funding. Although limited resources and a small population mean that Singapore-based businesses need scale, the government’s tactical strategy is to promote startup incubators or innovation labs, from which startups can grow and further expand to neighbouri­ng countries such as Indonesia, Malaysia and Thailand.

Property Guru is the most successful PropTech startup, raising US$49 million in 2012 and $129 million in 2015 and acquiring top property websites all over Asean, including DD property in Thailand. Furthermor­e, top property developer CapitaLand recently announced the setup of C31 Venture for $11.05 million, and it eagerly plans to invest up to $73.6 million to expand beyond Singapore.

Thailand’s property market is in the sights of PropTech startups given the scalable size of its market of nearly 25 million registered houses in 2015. Each year about 618,000 additional houses are completed nationwide, fostering a resale market and presenting potential for PropTech startups related to the resale property process. Following the global trend, list-and-search and tech-enabled brokerage PropTechs would be the first two pioneer segments to roll out at an early stage.

The recent Startup Thailand 2016 event introduced more than 200 top startups. One of the PropTech stars is Hubba, which reshapes ordinary workspaces into meet-andshare co-working hubs for freelancer­s. Thus, PropTech startups could be very attractive to a new generation of entreprene­urs.

One of the pitfalls for startups, including PropTech, is that cold, hard statistics indicate that their failure rate tends to increase at a progressiv­e rate for every year of operation, with nine out of 10 startups failing. The first three reasons for failure were a lack of market need (42%), followed by lack of sufficient capital or running out of cash (29%), and poor teamwork (29%).

The data also revealed that startups founded by an individual with no partners are more likely to fail because of poor marketing and the lack of a team. Thus, the key to being one of the 10% of startups that survive is that the product must meet market needs. New PropTech startups should start by rethinking everyday problems faced in a difficult property market, and improve their visibility and transparen­cy in order to empower homebuyers and other participan­ts.

PropTech also offers an opportunit­y for small investors to become property investors through crowdfundi­ng, raising small amounts of money from a large pool of people through an online platform

 ??  ?? Thailand-based DD Property is one of the many Southeast Asian affiliates of Singaporeb­ased Property Guru, the region’s most successful real estate portal.
Thailand-based DD Property is one of the many Southeast Asian affiliates of Singaporeb­ased Property Guru, the region’s most successful real estate portal.

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