PropTech facing the housing crisis
The traditionally innovation-averse property sector is going through a period of both economic and structural crisis. The new-build market is slowing down with a 34% drop in people reserving apartment new-builds in 2023, while older homes are following the same trend, leading to a saturation of the rental market. This shape-shifting crisis is benefiting proptech players. In amongst the chaos, they have found a driving force for adopting new technology solutions and new models. “It’s about making it easier to get on the property ladder, mainly through financial engineering solutions that haven’t changed for decades. We’re now also seeing that new builds also have different functions. And lastly, proptech responds to more structural needs, both societal and environmental, which can be summed up in more sustainable construction while keeping costs under control,” explains Sara Himmich, founder of Women in Proptech.
Shaking-up financing
PropTech made a name for itself by helping facilitate transactions and connect buyers and sellers. Players like Zillow in the United States, Se Loger in France or Idealista in Spain and Europe are now part of the digital landscape. As the crisis continues, the sector has turned to new financing models and is trying to find solutions to the complex problem of home ownership. Leasing, profit participation loans, co-purchases and new brokerage solutions are currently making a splash. In France, Sezame and Hestia are already positioning themselves in leasing, while Adam Neumann – the controversial founder of WeWork – has raised several hundred million dollars with Flow, which offers a similar concept. Meanwhile, other players are testing more original models. Take Heimkapital in Germany, which targets a more elderly market (or anyone asset rich and cash poor) by offering its users to sell part of their property to obtain cash up front while continuing to live in their home.
Generating uses
Beyond finances, proptech is also looking to shake up the way we live and try to generate new uses. In this instance, digital continues to facilitate connecting buyers and sellers as well as property management, but what constitutes as the main innovation is actually the new ways of “living”. At the centre of the trend are different forms of co-living which provide solutions to the housing shortage. Originally designed for nomadic workers, this model is now being extended to other types of users. In France, the startup Commune is aimed at single-parent families by offering spaces designed to facilitate solidarity between “solo” parents. Others, like DoveVivo in Italy, mainly target students by creating a model that’s somewhere between shared accommodation and student halls. The concept also appeals to seniors, by offering a community lifestyle and medical assistance, without the drawbacks of a retirement home. The French startup Colette goes one step further by imagining an intergenerational co-living model. After raising €1 million, the startup hopes to facilitate access to housing for young people while fighting loneliness experienced by elder hosts.
Optimization: AI transforming real estate
In terms of technological innovation, proptech is not immune to the wave of AI – generative or not – which is helping modernize and optimize how the housing sector works. While it is still difficult to embrace the full range of possibilities, a number of players are already using AI to optimize the buying and selling experience, as well as for professionals in the sector. With PropPal, the American company REAI offers solutions for real estate agents by automating property listing generation. Meanwhile for property sellers, the Italian startup Casavo (which has raised more than €700 million since 2020) has channeled its algorithms into iBuying, which consists of offering an almost “instant” property estimate and sale. The impact of AI can also be felt amongst investors, as the portfolio management sector is also undergoing transformation. Players like IMMO offer an automated property sourcing solution, as well as the ability to automatically identify the best investment opportunities.
A more sustainable property sector?
Beyond the economic crises, a part of proptech aims to build a more sustainable real estate sector, and one that works more closely with the construction industry. “We can’t talk about the property sector without mentioning construction. The time has come to consider the subject as a whole, there’s a lack actors with a vision of the entire value chain,” says Sara Himmich. In the meantime, a certain number of players are already laying down the brickwork necessary for more sustainable housing to emerge. For example, the German startup Predium helps property developers and property managers to set CSR objectives and to implement measures to reduce emissions more easily. To optimize a building’s environmental impact across its entire life cycle, these real estate management tools need to interface with the innovations emerging in the construction sector, which concern sustainable materials, energy efficiency, waste management, BIM and analytics.
The proptech sector is hyperactive, aiming to transform the way we build, finance and inhabit buildings. But to achieve this, it must look to creating long-term uses that go beyond testing ideas. “The main issue is scaling up. To be profitable, economies of scale are necessary and startups must succeed in going beyond the proof of concept stage,” concludes Sara Himmich.
