Tech, or the human touch?

Will digital disruption mean the death of the estate agent, just as the Internet ended travel agents’ careers a decade ago?

At the height of the most recent housing boom, in 2007, just over 80,000 estate agents were registered with the Estate Agency

Affairs Board. Four years later, in the aftermath of the global credit crisis and the subsequent recession, SA’S tally of practising estate agents had dwindled to fewer than 30,000.

Today, traditional estate agents face a far more serious threat than a temporary housing sales slump: rapidly evolving digitisation.

“Technological advancement is completely reimagining the way real estate is being developed, marketed, used and transacted,” says Francois Viruly, associate professor in construction economics and management at UCT.

Speaking at the annual convention of the SA Property Owners Association in Cape Town last month, Viruly argued that digital advances would fuel disintermediation as online platforms replace traditional services that lack efficiency and flexibility.

“Traditional operators will be under increasing pressure to adapt or expire,” he said.

Viruly believes the only real estate intermediaries that will move forward are those who understand and have access to data, a trend that is supporting the emergence of a new generation of so-called proptech firms.

A number of tech-driven property companies are already challenging traditional business models and commission structures in SA. These include Propertyfox, Leadhome, JVP Properties, Homebid, Steeple and Shareprop. These startups typically cut out the estate agent, allowing buyers and sellers to connect directly, and in so doing save on agent commission.

Online property portals typically charge either an upfront flat rate of up to R30,000 or commission of about 1.5% of the sales price — compared with traditional estate agents’ commission of an average 6%-7% (excluding Vat).

Propertyfox, which was cofounded early last year by Cape Town-based techies Crispin Inglis and Ashley James, has already made inroads in the online market. The company sold properties worth R96m in its first year of operation.

Inglis, who holds an MBA from UCT and Ivy League Cornell University in the US, says Propertyfox’s aim is to bring “customercentric digital disruption” to SA’S traditional property business model.

Inglis argues that bringing sellers and buyers together by means of an intermediary, typically a sole mandate with a single estate agent, is archaic and inefficient. “Besides, the practice also incurs prohibitive transactional costs.”

He challenges the traditional view that a buyer and seller shouldn’t meet. “We believe a seller can provide a far more authentic experience to a prospective buyer. Sellers know their own property and area best.”

The company’s adoption of the latest software systems also allows for add-on services such as research that gauges consumer behaviour and sentiment. For