Consumer-focused innovation in real estate drives investor interest in PropTech

Removing need for tenants to physically visit properties before buying/renting is leading real estate innovation, according to Spotahome CEO Alejandro Artacho in a research interview with FinTech Global.

Following on from rising investor interest into InsurTech, RegTech and WealthTech, real estate is just the latest sector to be transformed by the technology world. Institutional investors interest in the PropTech sector boils down to the fact it is solving real problems. Technological advancements are helping to increase efficiency and reduce costs of businesses within the sector, helping to create a climate for PropTech to thrive.

Artacho said, “Consumer behaviour has changed. People want instant solutions to offline problems. Companies that are able to win trust by securing the transaction and offering a guarantee on service, are leading the way in a revolution across a number of different sectors – and real estate is no different.” There has been an increase in the willingness of tenants to book properties they have only ever viewed online and never visited in person. This is complimenting the landlord’s ability to increase probability of properties, by lowering vacancy periods. PropTech’s impact on the real estate sector is opening up property marketplaces to international audiences, as they no longer need to visit a place before renting, which in turn is ensuring payment timelines rather than large gaps of empty property.

Investments into the PropTech sector have remained relatively stagnant over the past four quarters. The second quarter of 2017 saw $221m deployed across 22 deals, with the opening quarter seeing $182m invested through 20 transactions. While the levels have stayed around the same levels during recent quarters, they are significantly down from the investment level seen in Q2 2016. Last year’s second quarter saw the sector receive a colossal $1.2bn invested through 46 transactions; however, this was mainly down to two deals which represented around $1bn of the equity invested that quarter. Without the two deals, funding levels for sector remain in line with the other quarters.

Spain-based Spotahome is an online property marketplace that helps tenants rent apartments, rooms, studios and student residences for more than thirty days. The platform allows users to book the accommodation without having to visit the property, enabling renters and landlords to save money and time. Instead of having to complete property viewings, Spotahome staff go to the property, taking photographs, videos of the listing and neighbourhood.

Virtual visits are becoming a big part of the sector and leading the innovation across the entire real estate sector. This method of booking property is helping to remove geographical boundaries, with Spotahome one of the companies enabling customers to view properties exclusively online. Artacho believes virtual visits is the next logical play for the industry  and will only help to open even more opportunities in the market.

He said, “We already see drones being used to view the area around holiday villas and virtual reality headsets to take full control of the “visit” are closer than we think. The consequence of this is that overseas and intercity investments will become more accessible and mobility between cities and even countries has the potential to increase.”

The average investment size in the PropTech sector for 2017’s has been around $10m, but, over recent weeks there have been several big investments into the sector. Mortgage lending platform LendingHome secured a $57m Series C-2 funding round, as it launched a new vehicle for borrowers and investor to fund mortgages. Other recent high-level funding rounds have also come from property management system ResMan, which secured a $36m investment from Mainsail Partners, and property marketplace Nested, having netted a £36m round.

Spotahome recently closed its latest round of funding on €13.6m and was led by Passion Capital and Seaya Ventures. Other commitments to the investment came from Apostolos Apostolakis, Charlotte Street Capital, Gate 93 Ventures, Gura Investments, Howzat Partners, Mexico Ventures, Modara Technologies, Samaipata Ventures, Samos Investments. With this new investment the company is boosting its presence in the UK, Spain, Italy and the UAE, as well as expanding its reach with those markets. Capital will also be used to develop its technology to help serve both tenants and landlords alike.

PropTech is driving innovation across the whole industry as it helps to lead digitalisation of the market and make it modern. He said, “If we consider the impact that digital transformation has had in other industries, such as the change that ‘booking.com’ has created for the hotel industry, it is clear that it will trigger pressure for existing players in the market to offer increased service and choices to the customer, as well as being more transparent in operations.”

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