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REALX.Global: Proptech will grow and catch up with fintech

Scott Cations, Vice President, Altus Group

Proptech will inevitably catch up with fintech, delegates heard at Real Asset Media’s Proptech, Data & Innovation presentation, which took place online recently on the REALX.Global platform.

“The volume of investment going into proptech has been growing year on year, not just from the likes of Softbank and property-specific venture capital companies but from institutional investors as well,” said Scott Cations, vice president, Altus Group. “There are now over 9,000 proptech companies registered globally, most of them in the residential real estate sector, but there are opportunities in the commercial space as well.”

Despite the massive growth in the last few years, proptech is still small in comparison to fintech, taking into account the different sizes of the sector they cater for.

“Real estate provides investors with access to the largest asset class in the world, which exceeds by almost a third the total value of all globally traded equities and securitised debt instruments put together,” he said. “This highlights the importance of the role that real estate plays in the economies around the world. Yet fintech receives eight times as much investment even though financial services is a much smaller sector than real estate.”

The reason for the growth of fintech is that the financial services sector has opted for fast, all-out digitisation and automation, with passive investments like ETFs (exchange-traded funds) increasingly replacing active investments.

Fast transition not feasible in real estate

This fast transition is not feasible in the real estate sector, Cations said: “In the short term there is a need for active asset management, even more so in a pandemic. These active management strategies require local expertise, local presence and local relationships, which will ultimately limit the bold changes we saw in the fintech market.”

But it is only a matter of time. Real estate has a reputation for being slow-moving, but the pandemic has shown how quickly it can adapt to changing circumstances when it is necessary.

“Both traditional investors and service providers manage to go overnight from 100% working in the office to remote working,” he said. “Ultimately, they broke decades of traditional office working and yet business continued.”

IT teams adapted very quickly to increase infrastructure and implement tools like Zoom, while everyone else, managed to continue doing their jobs remotely, from valuing properties to doing due diligence to signing off deals.

“Until data and transparency improve, the road to a fully automated proptech world will continue to be slow,” Cations said. “But if you think things can’t change quickly, just think again, because things can change overnight.”

You can also watch the complete presentation here.