The Property Technology revolution won’t replace good old business values.
Jess is 27 and looking for a new flat to rent. Organic coffee in hand she scans the listings on her Property24 app. She checks her Flow app and sees she’s earned a few extra points for having paid rent on time again. Time to go to work so she grabs her dachshund (who’ll be dropped off at the pet daycare) and she orders an Uber.
Urban millennials, like any generation, have different needs and wants from their property specialists to their predecessors. And the property tech industry is coming to the party in a big way. Dare we even say: in a disruptive way? The traditional property industry felt decidedly disrupted by FNB’s news near the end of last year that it will be allowing its users to sell and buy houses to each other, effectively cutting out the need for estate agents (and their fees). FNB’s announcement had everyone sitting up and listening. However, technology entrepreneurs have slowly been taking some of the property pie for years now. And they won’t stop with just the pie – throw in the plate, oven and kitchen while you’re at it.
‘It is clear that if a business is not looking at what the consumer really needs or how to use technology to benefit its clients, then it won’t be around for much longer. Disruptors like us are moving quickly to redefine real estate in favour of the consumer,’ says Leadhome co-founder Marcél du Toit.
‘Locally, the cumbersome way of selling a property had to be challenged and there are a number of companies, and even large banks, who entered the real estate industry. This is great because everyone is acting in the best interest of the consumer and are helping to spread awareness that you don’t have to pay enormous commissions, because the first thing alternative or hybrid, flat fee agencies addressed was the high commission estate agents ask, usually in the region of 7.5% plus VAT, which is about R120,000 on the average property in most of South Africa’s major cities,’ says Du Toit.
Leadhome charges one flat fee of R39 995 plus VAT to sell a property – regardless of its value. The company also employ professional agents who are salaried and earn incentives based on getting the right outcomes for their clients. This is very different from the traditional model, where the agent gets a cut of the commission earned after a successful sale. ‘By examining the old model and finding ways to declutter the costing model, we have found a way to create more value for the consumer. So that’s why we’re not just an online model,’ says Du Toit.
DigsConnect.com’s Alexandria Procter echoes Du Toit’s statement that the underlying strength of a property tech company isn’t technology, but rather the way it enhances human relationships.
‘We’ve been super focused on building unique and personal relationships with as many of our landlords as possible. We try to call every landlord to chat about their property and their experience
on the website. I think that this personal touch gives them peace of mind. Many of them have seen our crazy marketing stunts, and we end up chatting and laughing for ages,’ says Procter.
‘This isn’t a very ‘techy’ solution, in fact it’s quite old-school, but we love that and we never want to lose that personal touch. There’s something about real human connection that you just cannot replace with technology, but it’s also not technology’s job to replace that human connection. Technology serves a very specific purpose of improving efficiency, and the DigsConnect.com brand relies on leveraging technology to make stronger human connections.’
Procter is a DigsConnect.com founder, along with Brendan Ardagh and Greg Keal. The website is Africa’s largest student accommodation website. It grew from an excel speadsheet in the UCT SRC offices, to a platform with over 30 000 visits each month and more than 50 000 beds listed to date. ‘It has been one hell of a journey,’ says Procter.
‘When I was on the UCT SRC, my portfolio was Day Students, which included where students live off-campus. I was inundated by desperate calls from students who had no place to live, and similarly by landlords who had available properties and no channel to market to students. I knew there had to be a better way, and so DigsConnect.com was born!’
According to Procter, the property technology sector’s underlying fundamental is to identify and solve key problems consumers experience. ‘For us it was about solving a problem that we ourselves were facing. Every year at varsity I struggled to find accommodation, as did all my friends. Then when I was in the SRC, I saw that this student accommodation issue was actually across the entire university. Then during the student protests later that year, I realised that it was actually across the entire country! There’s a phrase I really like which says: ‘invention isn’t disruptive, only customer adoption is disruptive’ and I think about this every day. Data doesn’t lie. If users keep coming back to your site, if your growth is phenomenal – chances are you’re onto something that’s adding value to people’s lives. Data tells the tales.
Procter believes that a dangerous place for property players, and real estate agents in particular, cashing in on the Proptech bandwagon, is straight out replication of their archaic paper-based systems.
‘We’re taking it a step further – Airbnb for long-term student rentals. Our experience so far has proven to us that more and more landlords actually want control of their own property management, but just need to tools to make that safe and easy to do.’ A key trend for Digsconnect.com is growth in student numbers. ‘The Department of Higher Education and Training wants to greatly increase the number of students at higher education institutes, and for us this means more students that will need student accommodation.’
As retail agents, property developers and the legal and services industry eye digitalization, many of readers and delegates at our events seem bewildered by the very first step of this process: budgeting.
‘I think the industry should be investing in tools that help them better connect and create a relationship with their clients through tech. It creates scalability, stickiness and predictability for their business. It has most the impact,’ says Gil Sperling, co-founder of Flow, a rewards app for tenants.
‘I think that the best technology will surface and prevail really quickly, and I think it’s because housing is such a basic human need that people will quickly discard tech that is not adding value. As with any sector, in the early days of technology, companies pop up like mushrooms and ultimately consolidation happens and a couple of really valuable platforms prevail. With Proptech I believe that will happen relatively quickly,’ he says.
‘Where we live, and how we pay to live there, is one of our most basic needs, yet we seem to still be relying on an outdated system that only reward a few parties, and certainly doesn’t reward the tenants. We want to be an enabler in this new era that we call Generation Rent, by creating a transparent ecosystem where we empower and reward tenants to take care of the landlord’s asset. This benefits both parties and allows for a symbiotic relationship to last in perpetuity, says Daniel Levy, Sperling’s co-founder of Flow.
‘The current market we are after are millennial or Generation Rent. These are generally first or second time jobbers between 23-35, who are technologically savvy and rent. We’ve focused the services and rewards partners for Generation Rent but will open this up as the market adopts Flow. From the landlord/agent side, it is small landlords, to big agencies and property managers, says Sperling.
Flow is a good example of how a millennial user base is willingly connecting with landlords who may be from a different generation and prefer faxing over Whatsapping.
On easing the latter into this system, Sperling says that the trust is built thanks to the tenant adopting the technology first. ‘Tenants can use the app without their landlord or agent, and the landlord will start receiving basic communications with rental payments and basic insights to help ease them into using the full journey.
The future looks rosy if you’re wearing the right VR headset…
According to the people REImag spoke to, the future of property buying looks much like it does now – but with a few tweaks.
‘The experience of buying a house will definitely evolve,’ says Sperling. ‘Things like VR will come into play and allow you to experience the property more in-depth, which will allow you to view more properties quickly. I also think that data and social information will allow us to make far more informed decisions when buying a house. Agents are always going to have some role as with a large transaction like that you’ll always want a person to advise on subjective and intangible factors. But agents will need to adopt technology to help them do their job better – a win-win for all.’
‘I think that, with the exception of the properties priced above R7.5m, property search will still be dominated by the internet. There will be many process improvements like better ways to view properties (real-time bookings at a time that suits you), online negotiation tools, real-time granting of a bond, a shorter transfer process, and transparency into each step of the journey, but the fundamentals will remain: the vast majority of people will still want to physically visit a property to inspect it and deal with a human to close a deal,’ says Leadhome’s Du Toit.
Internationally, Redfin and Purplebricks have been leading the way in utilising technology and combining it with great people to deliver superior products at a lower cost to the consumer, according to Du Toit. ‘Zillow’s strategy is also inspiring and I really look up to Rocket Mortgages for how they have taken market share from the US mortgage providers,’ he says.