Laptop with analytical data, REalyse

REalyse’s Founder and CEO, Gavriel Merkado, shares his insight into the future of the UK property investment market. He explores the importance of data efficiency in the real estate sector and how new technological advances will shape its future, with REalyse marking a firm step in an innovative, progressive direction.

Read time: 10 minutes

Big Data and the Future of UK Property Investment

The first data systems emerged in the financial sector in the 1960s, when machines like the Quotron began to deliver stock market quotations directly to users via electronic screens. With this change, brokers, traders and investors were able to monitor prices more quickly and easily than they could with the old apparatus: printed ticker tape machines and phone calls. Since then, the financial sector (alongside the scientific community) has been at the forefront of using data to drive efficiency.
Over time, these advances made their way to improve the efficiency of other industries, but not always so quickly. From the first electronic listings and transactions to the first data and analysis systems, developments in real estate data technology have lagged about 30 years behind those in the financial sector.
In finance, mass digitisation meant that transaction costs lowered considerably while the number of transactions increased wildly. Customers became less reliant on brokers for information and transactional services, the job landscape shifted, and a slew of new products and services emerged, varying in their success.
What can we expect from the aftermath of this transition in the real estate sector?

Reduction of Transaction Costs

There has been a reduction of transaction costs as capital has replaced labour in the delivery of services. That is to say, since 1960 less expensive machines replaced more expensive machines; which then also replaced people. For instance, we are already seeing the beginning of the reduction in transaction costs occurring with the emergence of fixed cost and low cost sales and lettings agents such as Emoov and PurpleBricks. The market appears to be in a process of ‘price discovery’ as different low-cost agents attempt to find prices at which they are both competitive and profitable. Whilst a ready flow of investment capital may underwrite short-term losses in favour of market share, a steady normalisation of pricing should begin to occur as the right standards of success and service delivery among the new low-cost agents emerge. Ultimately, anything that can be done by a machine will eventually be automated as such. As this shift occurs, the human roles will start to change from administrative tasks to consultative sales, structuring, and relationship networking.

Consolidation

The changes brought about by new technologies often initiate a consolidation process. Introducing more efficient business practices allows smarter companies to either outplay or buy out their less efficient competitors. Agents who wish to survive in this new market will have to provide other value-added services: not competing on pricing per transaction, but competing on value provided.

Transaction costs in other areas of real estate such as conveyance, surveying, and legal services are also likely to fall as service providers gain access to new technologies and software that allow them to ‘do more with less’. As those technologies advance, developers, agents, and investors will no longer need to outsource specialist work. Data and analysis systems will allow them to bring these tasks in-house at a fraction of the cost.

More Efficient Solutions

With new data systems, it will be possible to understand minute details such as how office spaces and utilities are being used and where prices and people are moving. This influx of information in the market will provide greater security for the ‘buy side’ of a transaction.

Facilities managers would feel more comfortable upgrading services if they knew exactly how they were being used. Homeowners would switch to new energy solutions with more confidence if they knew precisely how much it could improve their efficiency. City planners would be able to improve urban transport if they had accurate data on traffic patterns.

Most importantly (in our view at REalyse, at least) property developers and investors would have clearer understandings of the market and market forces. This would allow them to quickly reallocate capital and resources, thereby creating a more efficient and faster property development market.

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