Digital disruption is a phrase that has been prevalent in the media recently, which has led to increasing discussion of the topic within the real estate sector. As we have all seen, numerous industries have completely transformed due to digital disruption.
Notable instances include the demise of CD and record stores thanks to online music purchasing through iTunes and, more recently, online streaming services such as Spotify or Pandora. One of the most recent industries to come under threat is the taxi industry. Their ongoing battle with ride-sharing provider Uber has been making headlines for many months.
Digital disruption is a risk facing numerous industries, but is the threat to the Australian real estate industry real or will the industry remain as one of the few untarnished sectors?
Discussions of disruption within the industry have recently increased with two digital platforms gaining traction in the US. SQFT is an online application that eliminates real estate agencies out of the equation and allows sellers to complete the sales process themselves. However, bringing a similar model to Australia would face numerous legal difficulties. The second platform, Opendoor.com, differs in its offering. This website makes instant offers on properties, and then purchases and often renovates the property before reselling for a profit.
Both SQFT and Opendoor.com have been noted by numerous Australian real estate professionals as potential disrupters to the industry, but I am of an opposing view.
Real estate is fundamentally a customer service-based industry, both in the property management and the sales departments. This core service offering is something that digital platforms are unable to provide to a potential seller, buyer, owner or tenant.
The recent property boom in the Sydney property market demonstrated, too clearly, the very glamorous and over-the-top nature of this market. Listed properties now feature professional photos, brochures, videos and even Q&A videos with the agent. Vendors and prospective buyers receive a full-service offering, and this has become the norm in Australia, especially in the capital cities. I believe that there would only be a very small section of the market that would be willing to sacrifice this level of attention and customer service in favour of self-service online platforms.
While these American digital platforms may not take off within Australia I do, however, believe that the real estate industry will see significant innovation over the next five to 10 years, as opposed to disruption.
The property industry contributed $182.5 billion dollars to the Australian economy last year, according to the Property Council of Australia. That significant sum of money would surely not go unnoticed by adjacent industries and service providers, but how could they infiltrate such a market?
Much of the disruption we have recently seen across various industries has fundamentally seen a transformation of a traditional service offering. How could this translate into the Australian market? One concept is that apartment buildings may partner with automotive companies and you have access to shared building vehicles as a part of your rental payment. The potential for future partnerships with numerous service providers such as personal chefs, cleaners, automotive companies or interior decorating services are endless. The property you buy or rent could provide you with a much greater service offering than just a place to live.
This could also translate across to the buying and selling process. Currently, this process involves various interactions with multiple service providers and institutions. The back and forth between the various parties is time-consuming, often frustrating and costly. Streamlining this process with modern technology could significantly improve the experiences of buyers and sellers, in turn increasing the value of the property sector.
I believe that we will start to see a huge amount of innovation as opposed to disruption in the real estate sector over the coming five to 10 years. The untapped potential of the Australian real estate market is significant, and I look forward to seeing how this innovation unfolds.
John Prendergast is the commercial director at property software firm Rockend. He has significant experience in start-ups, technology and logistics.