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5 Reasons Why Real Estate Will Undergo a Massive Transformation in the Upcoming Years

Christophe Bock

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November 29, 2021

The past decades have shown that innovation has had a major impact on nearly all industries. Time and cost savings, process optimisation, limited human errors as well as increases in transparency and efficiency are only some of the benefits that technological advancements have brought with them. However - and you might be aware of this if you have read our previous articles - the real estate industry is still lagging 5 to 10 years behind other sectors when it comes to digital innovation. That being said, technological innovation will continue to grow at a rapid pace, and we shall expect to see significant changes in real estate as a whole over the coming years. From the planning and development phases to the construction and handover phases, numerous processes will substantially evolve for the better (so we feel) in the near future. 

In the last 15 years, we’ve seen a lot of innovation in real estate around the ability to find a home, and now we’re seeing all this innovation around the way in which we buy and sell the home and how the transactions connect.
Drew Uher, CEO of HomeLight

Let’s cover 5 reasons why we at kodehyve believe that real estate will undergo a massive transformation in the upcoming years:

  1. First of all, communication and information exchange represents a key area that we believe will be heavily impacted by new technological advancements. Due to the real estate market’s fragmentation, with so many players participating throughout a project’s lifecycle, we often see workflow- and organisational pitfalls, such as coordination issues and communication mishaps. Operational profitability among European construction companies is very low, 5% at best (Sifted Construction Tech Report, 2021). While that leaves little to no room to increase budgets so as to explore new technologies, this also implies that it is an area that can experience major enhancements and benefits through digitalisation efforts. Hence, digitalisation should be more widely promoted to reinforce these areas. Currently, coordination issues and miscommunication often lead to reworks and delays, which results in unforeseen costs and reduced profitability. We believe that companies will gradually start adopting more efficient and homogeneous ways of sharing information and documents, e.g. using homogenous solutions that interact with one another rather than using heterogeneous tools that add more complexity than benefits to existing workflows. As the Sifted Report puts it accurately: “companies must use technology to figure out how to do more with less”. Put differently, companies ought to figure out how they want to leverage technology to scale their business in an effective and lean way. Collaboration and project management tools dedicated to the real estate industry can help a business in doing exactly that.

  2. Furthermore, virtual reality (VR) and augmented reality (AR) are two areas that have seen a large infusion of investment in the past years and are increasingly being incorporated into real estate. Right now, the customer experience of buying a home can be very time-consuming and stressful. It is usually a long process of searching for listings online (or offline), viewing (a lot of) property photos, and repeatedly driving across the city or country to participate in house-viewings. This is where virtual reality comes into play. Users put on a headset and are virtually transported into the property, without having to leave their house or real estate agent’s office. The virtual visit provides them with a much more detailed and clearer view of the property than traditional pictures, which helps to narrow down the properties they want to visit in person, and therefore saving a lot of time and effort. On a project development and execution side of things, augmented reality offers new visualisation capabilities for real estate developers, architects, designers, construction companies, investors and more. It is now possible to transform paper-based plans into 3D models, providing an in-depth view of the plans to all stakeholders, and thereby offering the project managers, construction workers, and buyers the opportunity to view the property in 3D before it’s even built (PwC, 2015). Even though it is likely that in-person visits will never fully disappear (especially for the first home purchase), we strongly believe that VR and AR have the potential to fundamentally enhance the way real estate agencies conduct house viewings. One can already observe today how various stakeholders, such as engineers, architects, and developers, increasingly use these technologies to optimise their work to enhance their workflows and reduce human error.

  3. What is more, blockchain technology and the wider metaverse (also called web 3.0) will profoundly impact the evolution of real estate transactions and all associated elements over the coming years. In the past, we have witnessed how web 3.0 technologies have disrupted other industries, chiefly the financial sector. To this date, real estate transactions are usually carried out offline, face-to-face, and with a range of entities involved. Moreover, these transactions are managed on centralised databases, often controlled by one or a few parties. We profoundly believe that this is going to change radically with the wider adoption of smart contracts on blockchain platforms. To briefly explain this concept, smart contracts enable the tokenisation of real estate assets to allow for a more efficient and transparent governance and management of the asset(s) in question, all while guaranteeing flexible transactions and trading mechanisms as seen in any other liquid asset class. There are multiple ways in which blockchain technology will change the real estate market for the better:
  • Platforms and Marketplaces: Blockchain offers a novel way to trade real estate on actual trading platforms and online marketplaces. Property owners can tokenise their real estate assets, which can then be traded like stocks on an exchange through online transactions - in a transparent way. Similarly, real estate funds can do the same and hence open up these investment opportunities currently reserved for the wealthier people to a much wider audience.
  • No Intermediaries: The participation of brokers, lawyers, and banks in real estate transactions may soon be a thing of the past (Deloitte, 2017). Platforms using blockchain technology will soon be able to take over functions like listings, payments, and legal documentation, hence cutting out the intermediaries between buyers and sellers. This not only results in time and cost savings but also substantially decreases fraudulent and generally criminal activity. This is one of the major added values blockchain offers within these contexts. 
  • Liquidity: At the moment, real estate is considered quite an illiquid asset because it takes time and resources to close a sale or development cycle. However, fungible and non-fungible tokens (NFTs) can be traded for other cryptocurrencies (including stablecoins) or fiat (if preferred) at all times. 
  • Fractional Ownership: Another hugely important aspect to consider is fractional ownership. Blockchain significantly reduces entry barriers to real estate investing because it allows for fractional ownership. As briefly mentioned above, smaller retail investors can easily pool their money to invest in a property, instead of having to wait decades before finally having saved up enough money to participate in the market. Through blockchain, they can easily buy and sell fractions of tokens, which will make investing in real estate more accessible to people. 
  • Decentralisation: Blockchain is decentralised and secure, meaning that all information is stored on the blockchain and can be accessed by all network users. Data is therefore fully transparent, immutable and verifiable. Buyers and sellers don’t need to trust a third party (that potentially engages in fraudulent activity itself), as all information is available to them.

  1. Moreover, it is important to consider the impact of consumer-driven and generational changes in real estate. According to a report from the National Association of Realtors (2021), Millennials are now the fastest-growing segment of real estate buyers today. Another report from the National Association of Realtors (2017) found that 99% of Millennials used the internet to search for information about properties, which is double that of Baby Boomers. Millennials are also changing from traditional mortgages to online mortgages because it provides a better user experience (UX), rapid digital communication, and on-demand service (Forbes, 2021). In 2017, 6 out of the top 10 lenders were non-banks (Washington Post, 2017). On top of that, 75% of Millennials are eco-conscious and favour environmentally friendly options when buying products (Nielsen, 2018), and this trend will most likely spill over into their property buying habits.
  2. Lastly, we believe that the real estate industry still has a lot of room for improvement in terms of its environmental impact. According to the Sifted Construction Tech Report (2021), the sector produced 374m tonnes of construction and demolition waste in 2020. There is also a 40% rate of ‘idling’ across heavy equipment, trucks and vehicles, implying that a lot of the time engines are on but not being used, and hence wasting tons of CO2. In addition, the report found that the construction industry is generating 39% of energy-related global carbon emissions. Add to this growing legislative pressure for the real estate sector to become more sustainable as well as new incentives for clean solutions, and one can understand why we are convinced that the sector will see significant improvements in this area over the next decade. Through more advanced data analytics, companies will be able to buy the right quantity of materials at the best price and monitor the usage of their equipment and machinery to avoid waste and unnecessary carbon emissions, for instance. Many ventures are also working on producing sustainable and reusable materials through 3D printing and other technologies, which more and more real estate companies will adopt in the future.

To recap, real estate will undergo a massive transformation in the upcoming years due to the fact that (1) information exchanges and communication will be facilitated in more efficient and user-friendly ways, (2) virtual reality (VR) and augmented reality (AR) will increasingly be used to optimise the work of real estate professionals, (3) blockchain technology will profoundly impact the evolution of real estate transactions, (4) stakeholders will come to understand the importance of consumer-driven and generational changes in real estate, and (5) the real estate sector will see significant improvements in terms of its environmental impact thanks to technological advancements. 

To us, it is clear that digital innovation has tremendous power to unlock the potential for improvements in real estate - no matter the specific use case. Hopefully, you are as excited as we are to see what the future holds for this industry.

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