PROPERTY PIONEER

When Steve Melhuish came to Asia, online real estate wasn’t on his list, but the opportunity proved too big to resist, and PropertyGuru has not looked back since. By Erich Parpart

The pioneering spirit is what drives many successful entrepreneurs and Steve Melhuish is a prime example. But the co-founder of Southeast Asia’s largest online real estate portal is the first to admit that he had no idea exactly what kind of business he wanted to pursue when he first arrived in the region.

“I really enjoy building new businesses. I spent six months travelling around Southeast Asia and fell in love with Southeast Asia,” the 48-year-old Briton tells Asia Focus.

“‘Startup’, ‘digital’, and ‘Asia’ were what I had on my wall in London in 2004 before looking into China and then ending up in Singapore. The real estate industry was also kind of an accident,” he adds with a smile.

That “accident” turned into PropertyGuru.com, which today has 16.1 million monthly views in Singapore and generates an estimated US$11 billion worth of transactions per year for its 35,000 real estate developer and agent clients. The site also operates in Thailand (DDProperty.com), Malaysia (PropertyGuru.com.my) and Indonesia (Rumah. com).

Before arriving in Singapore, Mr Melhuish had spent 12 years working in the telecommunications field in Europe. When he started his career, there was an air of excitement about mobile and other technologies and how they were going to reshape society. It wasn’t completely clear where the business was heading but the sense of adventure was something Mr Melhuish says he relished.

But his travel experiences had made him restless, and when his wife was offered a job in Singapore in 2005, the couple decided to begin a new adventure in Asia.

Back then, Mr Melhuish looked around the startup scene in Singapore and made an investment in ComiAsia, a startup for uploading, buying, and selling mobile comics. A year later, he recalls, “the whole property market exploded”, and that’s when he started thinking about a new move.

In 2006, Singapore faced the biggest increase in residential property prices in Asia with a 9.5% real (inflation-adjusted) rise as strong GDP growth of 7.9% pushed up property demand. Mr Melhuish was forced to move out of his home and the first thing he did was check to see if anything was available online. Unfortunately, he didn’t find anything.

“I had zero experience around real estate and zero interest at that stage but then what piqued my interest was the size of the opportunity,” he says.

“Seeing that some of the big property sites in some other countries like China, Japan, France, Germany, the UK and Australia were making profits was interesting so I started to research and saw that real estate is such a booming sector in Asia.”

He then pitched the PropertyGuru idea to one of ComiAsia’s investors, who introduced him to Jani Rautiainen, a Finnish entrepreneur who was working on a similar idea. Mr Rautiainen was based in Singapore but had a weekday job in India, so he and his new British partner worked on PropertyGuru for just two days a week.

With a population of more than 600 million at the time, and a rapidly expanding middle class for which property one of the most important investments they could make, Southeast Asia appeared ripe for a better way to connect buyers and sellers online.

The level of urbanisation taking place in Southeast Asia was another reason why Mr Melhuish became fixated on real estate. While Singapore over the past decade has gone from 4.3 million to 5.6 million, Bangkok’s population has surged from 5 million to 9 million, and Jakarta from 7 million to 20 million.

“The big cities here have been growing very fast and the view is that this will continue for another 30-40 years,” he says.

“So you have a US$150-billion real estate market that is growing every year and at the same time there is a big digital explosion and with the two combined, it looks like a really exciting opportunity.”

PropertyGuru makes money by charging agents a fee to use its platform and by selling advertising online and in printed newsletters. In Singapore, the company holds about 90% of the market, more than the next four rivals combined.

In 2015, PropertyGuru raised US$123 million from investors including TPG Capital and Indonesia’s Emtek Group for expansion. It was the largest fund-raising sum in the region after the popular ride-hailing service Grab.

PropertyGuru was considering going public and listing on the Singapore Exchange (SGX) but Mr Melhuish said late last year that the time was not right yet, and that the SGX itself tended to be oriented more to blue-chip businesses than to tech-focused startups.

GRABBING THE OPPORTUNITY

Even though he had no experience in the real estate industry when he started out, Mr Melhuish was a fast learner and saw the opportunity available.

“By being in the market, you kind of become a mini property guru,” he says, admitting that he’s not really crazy about the company’s name but decided to stick with it because surveys clearly show that people in Singapore like it.

“We were in Chinatown in Singapore and I was testing the names with Chinese aunties and uncles in their 60s who run snack stores there and they asked, ‘Why not use a local name?’ and my original choice, which is horrible now, was ‘StraitsHomes. com’,” he recalls.

“Since we didn’t get good feedback from the local population we decided with the survey results and now it stuck.”

Before settling down in Singapore, Mr Melhuish and his wife travelled for six months through Nepal, Myanmar, Laos, Cambodia, Vietnam and Thailand, spending four to five weeks in each country.

Most of the time they were intentionally off the beaten track, often trekking in jungles. They fell in love with the different cultures and the excitement of being in emerging markets which have “a lot of energy, a lot of changes going on, and a lot of opportunity”.

“The one place we didn’t like was Singapore because it was too clean. It was such a big contrast when you’re on vacation backpacking and exploring, and then when you get to Singapore, everything is so organised,” he jokes.

“I thought China was going to be the best place to do business back then, so both real estate and Singapore were not in the original plan, but the key thing was the size of the opportunity.”

Apart from a huge real estate market, Asean is a leader in smartphone and digital adoption for e-commerce with around 200 million internet users, a figure that should double within five years, he notes. Online advertising is also projected to grow more three- or four-fold in the next five years.

According to Strategy Analytics, digital ad spending in Asia Pacific was worth around $59.7 billion in 2016, up 18.2% from 2015 and slightly ahead of North America for the first time.

“You’ve got a property market that is huge and growing. You’ve got digital adoption and digital advertising that are growing. So by being in this space, you will get to grow,” says Mr Melhuish.

“Some of the more traditional media players, in the last two or three years, have been reporting drops of 5-10%, sometimes up to 19% in revenue but at the same time we are growing by double that, so there is a structural shift that is taking place from traditional media to online.”

To respond to that shift, PropertyGuru has launched a total of 15 mobile apps for consumers and agents in the four countries in which it has a presence, allowing prospective buyers to search for property and enabling agents to upload listings.

FUTURE OPPORTUNITIES

Last year Mr Melhuish stepped down as CEO, handing the leadership reins to Hari V Krishnan, then the company’s president and chief business officer. As vice-chairman, Mr Melhuish now focuses on longer-term strategy, business growth and key client relationships.

One positive trend he sees for real estate involves cities where governments are investing heavily in infrastructure. Among them are Bangkok, Kuala Lumpur and Ho Chi Minh City.

“Vietnam is growing at a faster pace than Indonesia and it has been really hot in the past 12 months with 6%-plus GDP growth,” he says. “That obviously helps and they have a very young, hungry and dynamic population as well so it is one of the key markets.

“There is also the China effect that is taking place, where the Chinese are investing heavily in infrastructure such as the planned high-speed rail network that will go from Kunming to Singapore via Bangkok, and Bangkok will be the main connection point between Laos and Myanmar and then down to Malaysia and Singapore. That level of Chinese investment in infrastructure will definitely be supportive.”

Meanwhile, tourism growth supported by the continuous increase of Chinese visitors is spurring investment in the retail sector, with cities such as Bangkok and Kuala Lumpur already profiting from this prospect.

“If you take an investment horizon of five to seven years, these markets will continue to do well,” he adds.

Mr Melhuish points out that each market in the region is really different in terms of prices and size, but they all have room to grow. In some cases there will be spill-over effect when there is a cooling-down period in one country, with cash and liquidity moving somewhere else.

Singapore real estate investors, both institutions and retail, have been among the largest investors in property overseas and even more so than China where Singaporeans are investing in property around the region, and also in markets such as the United States.

“As the other markets start to grow they will start to attract investment as well,” says Mr Melhuish. “Vietnamese properties have started to attract attention from Thailand, Singapore and Japan, and it is an ongoing process which is helped by some of the property developers that want to tap into some of these markets.

“For example, Japanese developers are quite active in places such as Vietnam and Indonesia, while Singaporean, Korean and Malaysian developers are also trying to get into these two markets. But I have not seen Thai developers yet because the market in Thailand is still vibrant and Thai developers do not have the need to diversify as much.”

There has been a cooling off in Malaysia for the past few years because of slowing GDP growth amid weak oil prices, and therefore prices have been dropping. But that means there are lots of good property deals in Kuala Lumpur, while the “Malaysia My Second Hand” programme is attracting a lot of retirees.

PropertyGuru’s websites let users search for properties and refine searches by price, location and other factors. They can see photos of interiors along with floor plans which saves time and money when compared to looking for properties via newspapers and agents, but it does not stop here.

In the near future, you will be able to use virtual reality to check out your future home from the current house you are living in, or acquire a bird’s eye view of your future surroundings by way of pictures and video taken by drone cameras. Mr Melhuish and his company are working on ways to offer such experiences to clients, though he personally believes some things should be experienced in person.

As someone who backpacked through Canada after college and then through Europe, Central America and Southeast Asia, Mr Melhuish is far from done with seeing the world.

“My father was in the army and we moved around every two years. So every two years it was new friends, new school, new home, unpacking and repacking everything, but Asia has been the longest I have lived anywhere. It’s my favourite backpacking destination so far and I have been here for the past 12 years. It’s now home,” he says.

“When you start travelling, you meet these people who have been travelling for years, so taking six months off is such a short time in your whole life. I would encourage anyone to consider doing it one time in your life because it is such a liberating experience.”

The complete freedom to explore is still something that this property guru is looking for and nobody knows which cave, jungle or mountain he and his wife will end up in next. But one thing is certain: they will probably go and check the wonders out by themselves instead of using virtual reality technology or drones to experience them.

When you start travelling, you meet these people who have been travelling for years, so taking six months off is such a short time in your whole life. I would encourage anyone to consider doing it one time in your life because it is such a liberating experience You have a US$150-billion real estate market that is growing every year and at the same time there is a big digital explosion and with the two combined, it looks like a really exciting opportunity