London is only rivalled by New York in the way in which it brings together numerous world-class industries — from finance to fashion — and we are starting to see capital coalesce around the sectors in which the U.K. has a global competitive advantage. The property industry is one of these.
London plays host to some of the largest global property investors, many of which have established a strong presence on the international stage. Investment banks and institutional investors have accumulated significant commercial property portfolios, and it is practically impossible to open a weekend newspaper without coming across discussion of property yields for the growing class of buy-to-let landlords.
The combined assets and influence of the sector is vast. It is also ripe for disruption.
If you’ve ever bought an apartment or house in the U.K., you’ll have some idea of how painfully ancient the real estate sector is in this country. With laws that were drawn up many hundreds of years ago, and a profession that still considers a round of golf de rigueur on a Friday, it typically takes 6-8 weeks to complete a property transaction.
Despite the residential property market being worth £5.75 trillion and agents dotted along every high street, it has been one of the slowest industries to adapt. Commercial property is even worse, with buildings valued at hundreds of millions of pounds being sold using printed brochures and email.
The rising cost of real estate in central London has been on a par with that of San Francisco. We didn’t need Facebook’s IPO to kick-start a property boom after the financial crisis — just low interest rates and the safe-haven status that attracts oligarchs. Or so the media would have us believe.
The truth is that, like the tech industry, property investment has for the most part been driven by FOMO — fear of missing out. With stories of rapidly rising property values, a limited availability of stock and a lack of transparency in an industry that remains largely unregulated, agents have whipped their victims into a frenzied buying spree.
Thankfully, the industry is in the midst of change. Online marketplaces such as Rightmove and Zoopla, which continue to benefit enormously from the shift to mobile, have clawed power away from high street agents and opened up the residential market.
A new breed of online agents such as eMoov are now starting to cut out the high street agent altogether, and are thriving thanks to fees of a few hundred pounds rather than tens of thousands of pounds. The better high street agents (whose retail spaces are about as redundant as your old Blockbuster store) have put up a good fight, but we know how this story ends.
Innovation in real estate tech in London has accelerated, driven by a new generation of entrepreneurs who have become frustrated with the slow and tedious ways of working that have been so commonplace in the sector. Motivated by rapidly rising real estate prices, they are more than happy to challenge the status quo. Everywhere you look, middlemen are being squeezed and margins are being eroded.
Rentify is replacing expensive and substandard rental agents — with more than two million landlords in the U.K. alone this is a compelling proposition. We’re also seeing the democratization of the buy-to-let sector, with consumers now able to invest from as little as £50 on property crowdfunding platform Property Partner; given the nation’s love affair with property and with interest rates at an all time low, this is one to watch.
The legal side of the industry, one of the biggest causes of frustration, is being modernized — with new technology that is speeding up the process and bringing greater transparency. Interestingly, it is the Law Society leading this charge, no doubt driven by the many thousands of complaints that it receives each year.
The same is also true on the commercial side of real estate. We have marketplaces for office space (again, Zoopla and Rightmove), for finding shared office space (Hubble) and even for pop-up shop space (Appear Here). Startups range from those helping developers find land and carry out valuations to creating 3D visualizations of buildings’ infrastructure for improved efficiency.
It’s been fascinating to watch the property tech space developing. It’s an industry where billions are invested annually, and it’s chock full of very smart, ambitious people.
The best of those people can see other industries that continue to be improved and made more efficient by the application of technology, and they want to see their industry dragged — often kicking and screaming — into the 21st century.
It has already started, and it will accelerate. You can bet your house on it.
NB: Much of this appeared in TechCrunch on 20 July 2015!