Is proptech coming of age in South Africa?

Covid-19 accelerated property technology trends emerging before the global health pandemic, and South Africa’s real estate sector is slowly adapting to the new digital reality.

Property technology or proptech goes as far back?as the 1980s – but it wasn’t until the early 2000s that the so-called first generation of proptech companies?came online.

With my brother Mark, in April 2000, we launched SalesBid.com, one of South Africa’s first proptech companies and e-commerce providers, which spun out of the Auction Alliance to match corporate property buyers and sellers.

Ostensibly an online auction platform, we described the platform as a dynamic pricing platform which involves the upwards and downward fluctuation of prices until the needs of both the buyer and seller have been met.

In November 2000, an ITWeb article stated: “Every so often, an e-commerce company beats the rest of its field in the race to develop ground-breaking technology. South African company, SalesBid, announced this week that it had done just that with the successful sale of?large property development for the City of Johannesburg using online technology - setting a first for South Africa and pipping giants like US-based Fairmarket.com at the post.”

SalesBid was 10 years ahead of its time.

In the wake of the dot.com crash of 2001, we closed the business and focused on traditional auction sales – which have not changed in South Africa since the 1900s.??

More than 20 years later, the incorporation of technology into daily operations within the South African commercial real estate sector has been slow. Most large property owners use systems like MRI software (previously MDA) to manage their portfolios, and this is where the use of technology ends.?

While the sector has slowly adapted to technology, it is not immune to technological upheaval. According to Future Market Insights data, the proptech sector, valued at US$18.2bn in 2022, is predicted to grow 16.8% to US$86.5bn in 2032.

The first and best-known global proptech firm is Airbnb. This company disrupted the tourism and hotel industry by enabling the renting of apartments via private individuals worldwide on its online platform.

While the financial services sector has already experienced digitisation with financial technology (fintech), the real estate sector is still in the infancy age of digital transformation. Increasingly, new ventures are coming up with innovative solutions to close the digital gap in the property industry - the largest financial asset class in the world with a market cap of around US$320trn.

In the USA, Europe and Asia, high demand for proptech results in lower operating costs, helping real estate owners, managers and brokers save money and time.

Asset and property management software is the tip of the iceberg in expressing how far proptech has come. The traditional real estate journey, including online search, buying, selling and renting of the property, has changed due to technology. Rising inflationary pressure on real estate will result in increased technology disruption in one of the world’s oldest investment asset classes.

Globally, real estate investment and operational decisions are based on a data-driven approach, data gathered from Artificial Intelligence and other tools. As companies grasp these concepts, proptech also provides enhancement tools such as sensors to capture and effectively use data to make intelligent decisions.

These tools can be used to obtain and utilise market data to screen and evaluate development, investment and leasing opportunities, manage investment underwriting processes, remote facilitation of real estate transactions, support leasing processes and lease administration, provide additional insights about tenants to improve relationships, building operations and selling real estate.

With the proptech evolution coming to a building near you, where are we headed next?

Here are the five biggest proptech trends to monitor in 2023 and beyond:

eSigning will become the norm

The Covid-19 pandemic accelerated the eSigning [eSignature technology) of real estate agreements. Globally, the digital signature market is projected to grow 26.3% annually between 2021-2027.

Proprietary advertising solutions

New digital advertising platforms that provide customised solutions are emerging. Prop24.com is the leading platform for real estate brokers and agents in South Africa. However, this popular platform needs to be more effective due to its overcrowded classifieds section filled with repeats of the same stock. Globally, real estate advertising is a $30bn industry ripe for disruption.

Rental property management and automation?

Automation is becoming a disruptor in real estate management; with platform expansions and optimisation, management can quickly adapt to property owners’ immediate needs.

Growth in fractional real estate investments

Companies like EasyEquities, SA’s low-cost investment platform, have disrupted retail investing – a trend beyond the stock and crypto markets. Investors are eager to get involved in real estate investing too. EasyEquites, through EasyProperties, offers fractionalised property ownership enabling individuals to invest from as little as R1 - the same way it provides fractionalised share investing.

Listed real estate investment trusts (Reits), the traditional go-to for investors, is ready for disruption by smaller investors. Due to the significant capital required to buy properties, proptech companies are turning to fractional and crowdfunding property investment opportunities.

Buying and leasing with technology

Ironically, the Salesbid model is finally taking the real estate world by storm. A few well-known proptech companies including Zillow and Redfin Corporation use technology tools to help tenants, buyers and sellers find properties and close deals.

Buyers, developers, estate agents, and property management companies all use proptech. Online available data give prospective owners, investors and other stakeholders insight into property prices, trends and other factors that can influence their decision-making.

Transparency allows for fair pricing as it helps the market self-regulate, giving prospective buyers and tenants greater confidence in their decisions.

We expect South Africa’s proptech market to gain momentum in 2023. Real estate owners will lean on digital solutions to manage their leasing and asset disposals like never before.