Digital disruption is a phrase that has been prevalent in the media and the issue is regularly discussed in the real estate sector.
As we have all seen, numerous industries have completely transformed as a result of digital disruption.
Notable examples 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 businesses to come under threat is the taxi industry. Their ongoing battle with ride sharing provider Uber has been making headlines in recent months.
Digital disruption is a threat facing many industries, but is the threat to the Australian real estate industry real or will the industry remain as one of the few untouched 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 from the equation and allows sellers to complete the sales process themselves. This is an interesting concept that has gained some momentum in the US, but bringing a similar model to Australia would face numerous legal difficulties.
The second platform Opendoor.com differs in its offering. This platform makes instant offers on properties, before purchasing and sometimes renovating the property before reselling it 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 hold 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 our market. Listed properties now feature professional photos, brochures, videos and in some instances 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 who would be willing to sacrifice this level of attention and customer service to use self-service online platforms. While these American digital platforms may not take off in Australia, I do believe, however, that the real estate industry will see significant innovation – rather than disruption – over the next five to 10 years.
The property industry contributed $182.5 billion to the Australian economy last year (source: Australian Financial Review). That significant sum of money, undoubtedly, does 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 resulted in 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, as part of your rental payment, you have access to shared building vehicles. The potential for future partnerships with 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 buyer and seller experiences, in turn increasing the value of the property sector in the Australian market.
I believe that we will begin seeing 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.