Looking Ahead To 2024 and Exploring the World of Proptech in Canada

For most of the past year, I’ve been sharing perspectives on building and scaling KIMP and being an entrepreneur. And as we draw closer to the end of year, I wanted to share something new that I’m excited about. A venture in the proptech space.

For about eight months, my team and I have been brainstorming and starting to build strategy around a new project. I’ll get into the specifics as we get closer to launching our beta. But for now, I can share that it’ll be a platform that helps support buyers and sellers in making more informed decisions and in completing more efficient and transparent Real Estate transactions.

So, why can’t I wait to enter this space, even when I know firsthand how gruelling startup life is? Well, for one, I love all things real estate. I can spend hours lost in listings and articles about the different factors influencing the market at any given time. To put it another way - if I won the lottery, my first instinct would be to invest in more properties and lands. And then figure out creative use cases for, and ways to generate revenue from, them.?

In addition to that, through my travels I’ve had the opportunity to see how the real estate industry operates in places like Bangalore and Dubai. And to put it bluntly it feels like they’ve long-since outstripped Canada in terms of how they manage real estate transactions. India itself is a fascinating space to watch, with a lot of proptech startups having achieved unicorn status.

Now, I want to be clear that this is not on account of a lack of effort from entrepreneurs. Our regulations have just been that outdated and limiting.

That’s why it’s exciting to see how the proptech industry in Canada has been ramping up. Over the past decade alone, around 75% of Canadian proptech startups were founded (per The Proptech Collective). Considering that there’s been little innovation in the Canadian real estate industry from other players, it’s exciting to see entrepreneurs coming in to provide creative solutions and eliminating unnecessary friction in real estate.

To date, there are just over 500 proptech startups in Canada, with 46% concentrated in the GTA. And their products span everything from helping users find properties, to evaluating and financing, to closing and property management.?

There’s also a lot of exciting action on the mergers and acquisitions front, with players like RBC and Questrade scooping up tech-enabled brokerages. The strategy seems to be investing in proptech to engage with their customer bases at each stage of their purchases and creating ecosystems to keep them within.??

To find out more about the Canadian proptech space, I’d highly recommend checking out Proptech Collective , and their most recent report on Proptech in Canada: https://static1.squarespace.com/static/5f8d08dd6f25aa7caf32494b/t/655536604b877566aeeb8a19/1700083305960/2023+Proptech+in+Canada+Report_Proptech+Collective.pdf

Now apart from all the really cool products and solutions in this space, there’s also recently been some shifts that will impact how we all complete real estate transactions going forward. In case this hasn’t been on your radar, I’ll quickly recap some of that below:

Starting December 1 of this year - just a few weeks back - legislation that governs real estate, in the province of Ontario, went through a big shift. Specifically the Real Estate and Business Brokers Act (REBBA 2002) was replaced by the Trust in Real Estate Services Act (TRESA). And in terms of changes that impact the average person here’s a breakdown of some key points:

The introduction of self-represented parties. Previously, Realtors could work with individuals as clients or customers. To make things simpler, Realtors can now only work with individuals as clients or as self-represented parties.

The designation of self-represented party is now available for those who wish to represent themselves in real estate transactions. In order to represent yourself you’ll need to fill out some paperwork. And it’s important to keep in mind that Realtors are not allowed to provide services, opinions or advice to a self-represented party. They can however interact in limited ways if it is in service of their client.

Sellers can now opt for a transparent offer process in addition to, or as an alternative to, the closed offer process (aka blind bidding). This is meant to help with negotiating the sale of a property. The way the transparent offer process works is that when a seller gives their brokerage the go-ahead, they can share details of competing offers with other buyers (except any identifying info of course). A seller may start with a transparent offer process from the get-go, or they may decide to go that route after getting multiple offers (e.g. a hybrid offer process).?

For a full rundown of TRESA, you can check out the OREA site here: https://www.orea.com/tresa

Since we’re just a few weeks in, it’ll be interesting to see how much these changes impact the market. Especially as we get into the new year, and the typically busy spring season. At the same time, it’s also fascinating to take a look back. There are several startups that have been putting pressure on the industry to make changes over the years through their innovations. There’s nothing more frustrating for an industry that’s slow to move than a startup that produces proof of concept.

And sure enough, that’s led to legal battles and backlash. Meanwhile in 2023, these changes are being rolled out across the board in Ontario. Interestingly, some of them have already been in place in other provinces, not to mention other regions in the world.?

Setting aside the push-and-pull in the industry, there’s also a lot of shifts occurring in consumer sentiments. Going through a few forecasts from from real estate companies and associations (RE/MAX, Royal LePage, CREA) and the Bank of Canada, reinforces trends we can see all around us:

1) Canadians still widely view homeownership as a goal. By RE/MAX’s estimates, upwards of 70% do. But the context is changing. For some, this means they’re casting the net wider when it comes to where they’re considering living. For others, they’re considering more factors beyond the typical (e.g. neighbourhoods with good schools), to things like climate change risks (e.g. likelihood of flooding and wildfire impacts, etc.)?

2) Affordability remains a prime concern, from those facing mortgage renewals and exorbitant increases, to those trying to figure out when and where they can eventually make a purchase.?

3) At the same time, it’s important to remember that there are trends that are related to particular demographics. For example, newcomers (those who have recently arrived and up to five years out according to the Bank of Canada) represent a group that has a higher number of individuals planning to make purchases in the next 12 months. And amongst millennials, upwards of 70% see higher interest rates as impacting their ability to engage in the market.

So with all this in mind, where is the market headed in 2024? It’s confusing to say the least. While one forecast will have you believe that it’ll normalize and even bounce back a bit in some regions (RE/MAX), another will tell you that we can expect pandemic level highs in 2024 (Royal LePage).?

Add to that we have our various levels of government in the mix, trying to identify and implement measures that will help with affordability and limit excessive foreign investment. One such example is Toronto's Vacant Home Tax, which went into effect in 2022, and will increase from 1 to 3% in 2024. Between that, and Ontario's Non-Resident Speculation Tax (increased from 15 to 20% in March 2022, and then to 25% in October 2022), and Canada's foreign buyer ban (implemented at the beginning of 2023), and other measures being discussed, the overall impact remains to be seen.

While I’m cautiously optimistic about all these measures, I’ll always put more faith into the efforts of entrepreneurs to solve problems and create new opportunities in novel ways. So I’m excited to see what more of them will roll out as we look to 2024. And I can’t wait to join them in the proptech space.

P.s. If you are building in the proptech space and need a sounding board - or love real estate and would like to be a sounding board, give me a shout.?