How a global meltdown and emerging new technologies are leading to the uberisation of the property market
No one seems to like estate and lettings agents very much. Only 25% of the public trusts the profession, according to a survey from Ipsos MORI, the research company. In fact, estate agency was labeled the second least trustworthy profession after politicians, who were trusted by just 21% of the population. So you may not be surprised to hear that not only have a number of startups dedicated themselves to transforming the property market but they’re doing so by challenging the very existence of intermediaries between sellers and buyers. “There’s certainly a desire to remove the middleman,” says Rupert Hunt, CEO and founder of SpareRoom, the houseshare platform.
And it seems as if this yearning to turn the sector on its head hasn’t arrived a moment too soon. While the past few years have seen fintech, adtech and fitness tech startups utilising new hardware and software solutions to disrupt their respective sectors, the property market has ambled behind. But the industry’s unwillingness to swap old familiar business methods for new and unproven ones isn’t that hard to understand. “Traditionally, you didn’t need to do a lot to do well in the market,” says Dominic Wilson, general manager at Pi Labs, the VC and accelerator specialising in proptech startups.
Not fixing something that ain’t broken is certainly a good way to save money when you’re talking about washing machines but in the property market it can be argued that this attitude has led to a slightly skewed sense of priority. “It was never anybody’s job to focus on the customer,” claims Gemma Young, co-founder and CEO of Settled, the online property platform, who used to work at an estate agency herself.
Yet the market has recently been forced to change to keep up. “Industry performance is very different now from what it used to be,” says Wilson. And all it took was the rise of new technologies and for the world economy to tumble off a cliff. When the recession hit the markets in 2008, it caused property prices to skyrocket and a knock-on effect was that the average age of first-time house buyers jumped from 28 to 30, according to the Halifax First Time Buyer Review from 2016. Adding to the price of properties themselves, buyers and tenants also have to consider the time and money invested in getting mortgages, whether that’s putting themselves through background checks or paying deposits. “This means that a lot of people are looking to innovate to reduce these costs,” says Wilson.
Indeed, plenty of small and agile businesses are stepping up to the plate by utilising new hardware and software solutions: the so-called proptech startups. While this isn’t the first wave of tech companies aiming to transform the market – with property platforms like Zoopla and Rightmove having shifted the focus from high-street estate agents to websites – if you ask many second-generation proptech entrepreneurs, they’d say these businesses didn’t change the sector because they were still using old-school agents. “It was fundamentally the same process,” says Calum Brannan, founder and CEO of No Agent, the property-lettings startup.
That being said, this first wave still played a pivotal role in bringing on the advent of proptech. “They are actually one of the biggest reasons as to why we’re seeing innovation now,” says Matt Robinson, founder and CEO of Nested, the property platform. This is because online listings increased the amount of data available to today’s proptech startups and also contributed by changing consumer behaviours. “We’re at the point now that people are happy to sell their house online,” says Robinson. “People would have found that extremely troubling ten years ago.”
Following the upheavals of the recession and changing consumer attitudes, proptech entrepreneurs are poised to take advantage of the evolving market. Brannan is one of them. “I wanted to give it the Uber-treatment,” he says. In much the same way the famous ride-hailing startup connects drivers and passengers directly, Brannan is now aiming to remove the middleman from the process of purchasing a home. “That means people can use technology to find a property, apply for it, do the credit and reference check, report all the repairs via an online system and have all the billing management done through a central platform,” he says.
And No Agent isn’t the only new enterprise aiming to cut out third parties. In fact, a lot of the new proptech startups are based on the idea of directly connecting sellers and buyers or landlords and tenants, allowing them to have an open discussion without an agent hovering over them, looking to boost their bottom line. “That changes the whole market,” says Young. “It’s such an emotional journey and you want to have a direct relationship with the person who you’re going to sell your most valuable asset. It doesn’t make sense having someone in a pinstripe suit acting as the intermediary.”
But what about having the letting agent show you around in your potential new abode? Tech could help be used to do that too. In fact, No Agent, along with companies like Keypla and PropertyScape, is using VR and 360-degree videos to give customers a chance to view a place before signing a rental agreement – sometimes even before the buildings are erected. “But I don’t think that it is going to be as relevant when you buy a house,” continues Brannan. “It’s a purchase that people don’t do very often so they’re probably not going to be very willing to just make a decision from VR.”
However, even if you ask the people at the forefront of the property market revolution, not all of them are convinced that the middlemen will disappear entirely. “Many estate agents are wonderful and I’m sure there’ll be customers who’d like a bit a little bit of handholding,” says Young.
Brannan agrees and explains that even though No Agent aims to let software do 100% of the jobs usually associated with agents, believes the startup’s customers still want someone to pick up the phone if they have any questions. “And that’s where our challenge lies: trying to reduce that human contact,” he says.
Given that the business is still very much in its infancy, it may seem impossible to predict the future but some proptech entrepreneurs are already quite bullish about the impact they may have. “People are realising that there is an alternative,” concludes Young. “My prediction is that proptech will get to a point where it overtakes the traditional sector.”