THE PROPTECH PRIMER
While technology is changing the world, the property industry has lagged far behind
Technology is changing the world, from finance to entertainment. The property industry – particularly in Hong Kong – has lagged far behind. But there are big trends emerging around the world that could change the nature of everything from building a new home to registering titles that could upend the market. Here are some examples of proptech and how it could change the property business in Hong Kong.
Proptech, the convergence of property and technology, is reshaping the way real estate is built, occupied, managed, transacted and recorded. Like the fintech industry, the proptech industry revolves around thousands of start -ups looking to disrupt the way real estate markets work, and the venture capitalists that support them. How elite property developers and governments get involved is an emerging topic.
In Hong Kong, some companies working in property have begun adopting proptech, but by and large, the industry and regulators have been slow in tapping into these advances, and analysts point to a number of reasons for this reluctance.
One reason, according to a research note of consultancy JLL, is “the high cost of living in Hong Kong and the city’s history as a traditional financial centre have arguably held back innovation and the development of the tech industry in Hong Kong.”
Another is red tape. Dr. Conrad Tang, chairman of the land surveying division at the Hong Kong Institute of Surveyors (HKIS), says regulators are already swamped with their daily tasks, and to promote the use of proptech across government, a special task force has to lead the initiative. Other reasons include the highly competitive agency business and a stagnant secondary market, as home sellers see no incentive to invest in extra marketing.
But still, the private sector has benefitted by adopting proptech solutions. For example, co-working space owners or operators are using sensors to detect which conference room or cubicle is vacant, and therefore can make a full use of the empty spaces, says Jeremy Sheldon,
managing director for markets and integrated portfolio services, JLL Asia Pacific.
Meanwhile, investment in property technology is pouring in. According to a November 2017 report by JLL, 179 prop tech startups based in Asia-pacific received US$4.8 billion in investments since 2013, or over 60 percent of the total proptech investments worldwide. Hong Kong and mainland China were the biggest recipients of these investments, with US$3 billion.
Hong Kong also has further ambitions to become a global hub for innovation and technology. It earmarked HK$10 billion in 2017, and another HK$50 billion this year to boost the sector, specifically biotechnology, artificial intelligence, smart cities and financial technologies.
Likewise, the Hong Kong Science and Technology Parks Corporation launched the Global Acceleration Academy in April 2017. Open to start-ups from around the world, each programme will have a three-month duration and HKSTP and the partner company will provide workshops to the start-ups and help them gain better understanding of the market trend of the industries.
Could proptech solutions be one of the big new start-up sectors to hit Hong Kong? Here are some key trends to watch:
MAKING SMART SPACES FIT TOGETHER, BETTER
Integrating Internet of Things (IOT) devices, Wifi connectivity and cloud computing, smart building and office design are redefining workspaces and building management. They improve space utilisation, increase productivity, and enhance energy efficiency, says Sheldon.
In particular, co-working spaces have benefited from the use of sensors, Wifi and connected devices like smart TV or screen that connects to laptops for presentations. Complementary IOT systems boost energy efficiency.
Recognising the benefits of coworking spaces, such as increased interaction between employees, large firms are also shifting some of their teams, especially those in innovative and R&D work, to these spaces. In Hong Kong, HSBC, Deloitte and Manulife have already moved teams to co-working spaces.
Swire Properties, whose co-working space and office were fitted with LED sensor light with auto on/off function, has inked a
deal with Wework to lease four floors providing about 54,000 square feet of space in a commercial tower in Taikoo Shing. And with organisations using the workplace to boost employee engagement and attract and retain talent, there will be a continued rise in companies using co-working spaces in 2018, Sheldon says.
Also, using an integrated Building Management System (BMS) to centralise the operations of building service components, from CCTV and access control to HVAC, energy use can be optimised and reduced, which helps building owners achieve green building accreditations, such as LEED issued by the US Green Building Council (USGBC) and BEAM Plus by the Hong Kong Green Building Council (HKGBC).
There are about 1,400 greencertified buildings in Hong Kong, a product of the government’s incentive to grant additional buildable area on new projects that received a green-building certification. Another incentive is that MNCS prefer leasing LEED certified office space because of their sustainability policy.
However, the Home Affairs Bureau currently lists over 40,000 privately owned buildings in Hong Kong, meaning most owners have yet to catch on.
BIG DATA ANALYSIS HELPS AGENTS PUT BUYERS AND SELLERS TOGETHER
Microsoft has teamed up with agent chain Ricacorp to launch Rica+, an Ai-powered home searching platform that both say will help estate agents better serve their clients.
Until now, property agents would rely on their knowledge and instincts to provide the right fit for a buyer. But in Hong Kong, Ricacorp has a property base of 1.7 million flats of various types, 4.8 million people and documents related to 1 million companies to organise. It makes the task of finding the right person for the right place
“Built in the Azure cloud environment, Rica+ integrates machine learning and big data analytics to enable estate agents to shortlist and identify the right properties faster and more accurately based on the client’s selection criteria and preferences,” says Cally Chan, general manager of Microsoft Hong Kong and Macau.
According to Microsoft, Rica+ combines AI and machine learning to analyse listings, transaction data, bank valuations, prices and customer preferences to generate search results, maximising the chance of closing a sale. Using an app or the website, agents input client preferences to match listings they might like.
CONSTRUCTION SECTOR CATCHING UP ON BIM
Building Information Modeling (BIM) is a 3D process that plays a pivotal role in a construction project; it allows for more collaborative, cost-effective and efficient processes throughout the design, construction and implementation stages of a building. And while cities such as Singapore have made BIM mandatory on all public projects, Hong Kong’s construction industry is still trying to catch up.
In a recent circular, the Hong Kong government said it would pursue the use of BIM technology in capital works projects starting in 2018, while the Construction Industry Council (CIC) has set up a BIM Innovation and Development Centre equipped with BIM software, 3D printer, scanner and digital photogrammetry to provide venue for conferences, seminars and workshops on the industrywide use of BIM.
The industry further hopes that the proposed development of a territory-wide, common spatial data infrastructure (CSDI) will help integrate BIM and geospatial data of Hong Kong. CSDI is essentially a mix of all geographic data and inputs onto a single platform. This platform allows planners complete spatial awareness and undergirds what we call smart city development. Incompatibility between data sets has been a challenge for years owing to differences in coordinating systems.
Victor Ng Wai-tak, senior land surveyor of Lands Department, has been quoted as saying that the use of CSDI will enable app developers to make use of raw data to develop a single app that meets the needs of different users in the construction industry.
VIRTUAL REALIT Y AND AUGMENTED REALITY GIVE HOME VIEWING A NEW PERSPECTIVE
Estate agents are embracing virtual reality (VR) and augmented reality (AR) technologies to offer immersive viewing experience and better customer services, especially when the buyer or the desired property is overseas.
Centaline and expat-focused agent OKAY.COM use Matterport, a Us-based VR company, to produce and publish VR footages on their websites. Local VR start-up Mewme offers VR production tools and a networking platform for agents.
Sotheby’s International Realty is the first real estate brand to launch a mobile AR app. The AR app updates the home buying and selling experience. It brings a home’s virtual staging images from 2D perception into augmented reality, the international real estate brokerage says. Essentially, the app allows the user to virtually furnish and decorate a vacant space.
“When a client purchases a property, it is not only a matter of money. It also reflects his personal taste and lifestyle. The app, CURATE, allows us to take the consumer on a personal journey in which they can visualise the house with their choice of furniture and decor before purchase. On the other hand, for the homeseller, it brings out the true potential of the home,” says Binoche Chan, COO of LIST Sotheby’s International Realty Hong Kong.
But compared with the US, adoption of VR among local, specially smaller agents has been relatively slow. That could be due to Hong Kong’s highly competitive business nature and vertical built environment. Torbjörn Dimblad, CTO of OKAY.COM, explains: “When agents are all competing to match clients with landlords, there is less incentive for the out-of-pocket expenses associated with VR and other investments in marketing the property.”
MOBILE APPS FOR HOMEBUYERS AND HOMEOWNERS
As a pioneer in using VR to market new homes, Sino Land used the technology to immerse potential buyers of a Sai Kung project into the coastal beauty of the location. The developer also uses mobile apps to provide buyers and agents with updated project sales information, according to Victor Tin, associate director of sales for the developer.
“Our app, designed for every new project, features comprehensive project information, including building and floor plans, videos and photos, sales arrangements, brochures and price lists. To streamline the buyer registration process and shorten queuing time, we also use QR code to authenticate buyer identities and arrange flat selection priorities,” he explains.
Existing owners may use another app, purpose built for each complex, to access concierge and clubhouse services, book facilities, order delivery, read notices and contact service staff. He adds that future residential projects, such as the one under construction in Kwun Tong, will be built with smart home features.
THE AI SHOPPING CONCIERGE
While it is undeniable that the success of online shopping comes at the cost of brick-and-mortar store sales, retail property owners and malls are now using newer technologies to lure shoppers back.
Asiabots, a start-up specialising in artificially intelligent chatbots, supported by an incubator programme run by Hong Kong Science and Technology Parks Corporation (HKSTP), was the winning team in the LINK-HKSTP Proptech Accelerator Programme, held last year with about 10 companies participating.
“The chatbot is built on our proprietary AI engine that can understand a language, which is Cantonese right now, and gives sensible responses. Whenever the shopper visits a LINK mall, he can ask the app any question, and the bot will tell the location of the shop, restaurant or anything else the user is looking for,” says Thomas Wong, founder and CEO of Asiabots.
Besides customer engagement, the AI concierge also enables LINK to collect and analyse shopper interaction and turn the data into useful analytics that will be extremely valuable to LINK and its tenants.
Drawing on this initial project with LINK, Wong says they are planning to develop their products
and establish a bigger presence in Asia by adding new languages to the service.
As Hong Kong’s largest mall owner and operator, LINK engages with these start-ups and provides them with valuable real-life use cases and problems, allowing them to adapt their technologies accordingly, says Damien Wu, CIO of LINK Asset Management Ltd, co-organiser of the LINK-HKSTP Proptech Accelerator Programme.
“We are able to identify matching opportunities with a select few, and we work together with these selected start-ups to develop pilot projects, allowing them to further validate their solutions in real-world conditions. Through this cycle of validation, feedback and fine-tuning, we hope to help these start-ups identify their product-market fit.”
However, LINK has yet to confirm whether it will hold a similar programme this year, but says it is discussing with HKSTP for another collaboration.
FACIAL RECOGNITION TRACKS FOOT TRAFFIC AND PROFILES SHOPPERS
Shopping malls and retailers increasingly use facial recognition technology to track customers and collect data about their demographics, according to Eric Or, managing director for Hong Kong and Macau at Jardine Onesolution (JOS), a technology services firm.
“Have you ever wondered how shopping malls these days could obtain detailed demographic stats about shoppers? Without the deployment of facial recognition technology in a CCTV system, that would not have been made possible.”
JOS develops and implements facial recognition systems to track foot traffic and identify basic demographic data, such as gender, age and ethnicity. The data is analysed and turned into actionable
intelligence that helps retailers understand customers better.
“When using sensors and cameras to collect personal data, it also involves privacy and security issues. That’s why retailers also have to think about investing in data security to prevent costly data breaches,” says Or.
Keith Griffiths, chairman and global design principal at Aedas, an architecture and design practice, says 3D printing has become a very important tool in the architectural profession.
“Architects use software such as Rhino and Sketchup to create 3D models of their designs. These 3D models can be used to generate movies, renderings and physical models of the designs. 3D printers create physical models of the designs within a few hours. Many different design options can be drawn and examined on the computer screen before the most promising options are 3D printed for further analysis.”
Until three or four years ago, 3D printing was not common in the industry, but architects, engineering firms and interior designers are increasingly using it. Although the construction industry presently uses 3D printing to validate design for manufacturing and assembly, verifying the feasibility of the design, enhancing the effectiveness of construction and eliminating uncertainties, 3D-printed objects still lack structural strength.
Richard Soon, director and architect at P&T Group, says Hong Kong is an ideal place to introduce prefabricated prefinished volumetric construction (PPVC), which has been in use in Singapore for a few years.
PPVC refers to manufacturing prefabricated modular units in a factory off-site before they are transported to the site in blocks and fixed to a structural frame.
“It alleviates construction worker shortage, minimises air and noise pollution, shortens construction time and improves site safety,” Soon says. “The technology is ideal for project owners who prefer standardisation and efficiency to customisation, like public housing, hospitals, schools, etc.”
But Soon says the method has limitations. As buildings are constructed block by block, structurally the building cannot be higher than 20 storeys. Given the very tight plot ratios in urban areas, residential developers want to build taller and denser, making the technology unsuitable for tall buildings or high rises, at least for now.
Also, prefab buildings may look boring as the trade off is aesthetics and style. Most developers claim their projects are luxury and PPVC undoes this argument. But thanks to standardisation and efficiency, Soon says PPVC is ideal for public works like schools, hospitals, community facilities and public housing.
ADOPTING BLOCKCHAIN IN HONG KONG TITLE REGISTRATION – THE MOTHER LODE OF SMART CONTRACTING
While blockchain is hailed as the next big thing in the fintech, using blockchain to digitise and secure property title registration and conveyancing (transferring land from seller to buyer) is a distant dream if Hong Kong does not reform its ancient deeds registration system and make changes to the outdated regulatory framework, according to experts. And yet, the need is only growing.
“To most developed countries, Hong Kong’s deeds registration system is a thing of the past. The entire UK, where the legacy system was inherited from, already switched to title registration in the early 1990s. If there is no reform, which was actually enacted in 2004 as the Land Titles Ordinance, to simplify title registration and transfer, Hong Kong can’t claim itself to be a real smart city,” says Dr Conrad Tang of the Hong Kong Institute of Surveyors (HKIS).
Under Hong Kong’s existing deeds registration system, the Land Registry only serves as an index and does not legally prove that a person is the true owner of a property. As part of the conveyancing process, both the buyer and seller have to hire a solicitor, separately, to make sure the seller truly owns the subject property, or that the title is “clean”.
This process is time consuming, costly and lacks transparency, Tang says. He points out that while the government may have scans of deed documents, these scans and the text within them are not searchable – much as an email containing a scan of a document, rather than the text itself, is not searchable. To move forward, the government must digitise all deeds, and then carry out an exhaustive land survey to identify boundaries, easements and encroachments.
And then to make way for blockchain itself, there are legal obstacles to clear. The Hong Kong Monetary Authority studied the situation and concluded in a white paper that a computerised blockchain title registration system is not possible under the current legal regime. One statutory requirement stipulates that “for any land transaction to be valid is that it has to be made in writing”.
Still, moving to title registration and then to blockchain offer clear rewards. Title registration will pave the way for clearer land and property ownership; faster conveyancing process; automation and transparency; and fewer legal disputes. Using blockchain, on the other hand, allows for a smarter, more transparent system, and is seen to dramatically cut the traditionally lengthy process of recording and transferring titles, with the added benefit of virtually bulletproof transparency.
In 2004, Hong Kong has enacted the Land Titles Ordinance, which aimed to move Hong Kong from a deed system to a title system. But so far, the government has been unable to get stakeholders to move forward on the issue. As of September 2017, it was still working towards forging a consensus on the ordinance.
But Hong Kong should take note that other jurisdictions are pursuing initiatives to using blockchain in title registration. The UK has announced plans to move the country’s land registry to blockchain by 2022, while Sweden, Ukraine, Dubai and The Republic of Georgia are all reportedly trialing the technology.
ABOVE Integrating Internet of Things will up the energy efficiency of buildings.
OPPOSITE AI learning and big data analytics enable real estate agents to shortlist and line up potential clients with the right properties faster and more accurately to their preferences. BELOW VR and augmented reality allow buyers to get a better...
ABOVE Mobile apps allow buyers to access comprehensive information on pricing and floor plans, as well as facilitate the registration process. RIGHT Chatbots use AI engines to handle visitor requests and can categorise these interactions and provide...
ABOVE Blockchain technology allows data to be decentralised, and therefore enhance the security and authenticity of sensitive documents.
LEFT 3D printing does not only help during the design stage of a building and produce physical models in a much shorter time than traditional modelling; it's also used to create large-scale components for construction.