Human influence and interaction will always remain a top priority for consumers.
The emergence of online platforms to buy and sell goods has rippled through many areas of the global real estate industry. High street retail has come under immense pressure over the last 15 years as significantly more consumers look to online merchants versus physical stores. This phenomenon, largely driven by convenience, has seen the proportion of consumers buying online rise from 20 percent in 2000 to 75 percent in 2018. Other areas of real estate have fallen victim to technology disruption, notably hotels with the establishment of online platforms such as Airbnb.
Are we on the edge of a technological takeover in real estate?
Are we going to be outsmarted by Artificial Intelligence?
Sceptics might suggest we will see mass unemployment in real estate as technology will transform more and more parts of the profession, moving across physical assets to the service provision. Yet, I am not so sure.
Human influence and interaction are a key part of the industry and it has been and always will remain a top priority for consumers. Let’s face it, technology is here to stay but so are we. That said, to adapt with new technology, we need to better understand the influence and more importantly, the opportunities that lie ahead for real estate businesses.
Scenario analysis is one way to facilitate future decision-making. While forecasting the future is nearly impossible, scenario analysis permits professionals to make more informed decision-making (Deloitte, 2016).
At first, the outputs of these might appear shocking or exaggerations, but scenario analysis is not about assuming the status quo. This year, we discussed the impact of a new technological wave impacting the global real estate industry. Our top three areas of development emerging as a result of new technologies include:
- Data availability: Markets typically benefit when information is shared efficiently between participants. Within the real estate industry, emerging technologies will mean that data capture and transfer will be more timely, benefitting the industry as it moves towards a non-centralised dispersion model. Valuers will be able to capture new information about buildings from their smart devices and view specific lease details so that they are equipped with full market information. More importantly, each and every valuer or agent is equipped with the same market information. Data transparency will encourage more timely adjustments to market movements and make the profession more informed. Largely, advances in technology for data capture and analytics will bring benefit to a profession that has traditionally been opaque.
- Autonomous valuations: The findings of my own PhD research on property valuation variance has shown that international valuations are exposed to human influence and as such variances. The potential deployment of Artificial Intelligence (AI) within real estate suggests a boom in new models for predictive data analytics. The emotionless appraisal of real estate assets is one that may outweigh the drawbacks of human heuristics and the psychological drawbacks of our inability to forecast into the future accurately. The speed of such deliverables will be bound by how the industry standardizes the information we store on buildings and leases, for instance, which are still hugely differentiated across global practices. This is a market where competition will not exist. Instead the most accurate valuation model (AVM) will rise to the top – after all, why would you choose the second or third best AVM. The standardization of industry practices will determine how much human involvement will be part of these AVMs. It will also impact asset classes differently, with adoption more likely in residential markets rather than on more complex commercial asset classes. If AVMs are commonly adopted, a world of more instantaneous bank lending and mortgage offers could be put into existence, speeding up the buying and selling process for property assets. Consumers would also expect mortgage processing fees and valuation fees to reduce as a result of automation.
- PropTech and Blockchain technologies: The introduction of more data and more autonomous processes within conveyancing would also mean the ways in which we buy and sell real estate are set to change. Despite the euphoria of Bitcoin throughout 2018, the technology behind the virtual currency brought us to better understand that a secured marketplace can be created online. We have already seen developers accepting Bitcoin and other e-currencies to purchase real estate. It will not be long before we can implement the same technology to trade physical and securitized real estate assets.
Within these three areas of technological development, there is a clear line of argument that supports the need for human involvement. My MSc Real Estate students had a counterargument to a technological takeover in that while ‘data will become king’, the ‘devil is in the detail’ meaning the establishment of all these technologies and innovations will require professionals to evaluate the assumptions and outputs. influence on the real estate market, the traditional asset silos of office, residential and retail will shift to more of a hybrid model. Technology and mass urbanization will drive this.
While technology will be highly influential in real estate futures, education plays a vital role. Tech firms looking to enter the market will need knowledge on the real estate fundamentals such as valuation and investment analytical techniques. We can see that these technologies will be developed to make the market and the conveyancing processes more efficient.
On an industry level, this is a great necessity for the market as we crave more transparency and standardization in the industry globally. Students concluded that in terms of digitalization, Dubai will be a global leader, an incubator for innovation as it has been many times over.
DR. MICHAEL WATERS
Director of Studies in Real Estate The Urban Institute, Heriot-Watt University (Dubai Campus)