Proptechs in Portugal – how can they support property development and investment?
Proptechs in Portugal – how can they support property development and investment?
There is no doubt that new technology, particularly blockchain, is now starting to influence and shakeup the real estate sector which traditionally has been a laggard when it comes to technology uptake.
But how can technology startups with innovative solutions help the property sector meet some of the challenges it faces today?
This question was throughly debated at the latest in a cycle of debates “Are you Brave” organised by the APPII – the Portuguese Association of Real Estate Developers and Investors which took place in Lisbon on Thursday in which issues such as transparency, volatile costs and time are being tackled by the latest generation of startups operating in the property market.
The issue of the “huge commissions” charged by brokerage companies such as estate agents in the residential housing market is an issue that has been tackled by Kazzify through its online platform which charges a flat fee for sale and cuts out the need for a middleman.
“Being on both sides of the market and operating in real estate has allowed me to understand the problems of real estate and the market on both the buying side and selling side” says Vasco Pereira Coutinho of Kazzify.
“I decided with the technology that exists today with the internet velocity and mobile phones that we had all the ingredients to put together a fantastic tool. We started in 2018 by analysing everything that existed in the world in terms of companies like us, we brought in all of our experience and knowhow in the market and I believe that we have a concept that allows developers, owners, services can use this platform in a very simple way on the seller side. On the buyer side, the buyer has a very transparent service with no ‘fuzzy noise’ in the middle,” he said.
“When you have a broker, you don’t always have a clear message, for example, if you’re selling your property it’s not always clear if the proposed buyer has another proposal for buying their property, if the proposal is delivered to you or not, and in this case we’re trying to make it as cleared transparent as possible for both buyer and seller,” he added.
More transparency
So what are the challenges, are new technology and startups needed, are they disrupting or killing existing business, are the big players partnering up with the smaller ones. What are the new models in the proptech world?
Pedro Simões of EY-Parthenon said that all of the startups at the workshop had the right answers and solutions now.
“When I think about the real estate market, we all know that we have low technology adoption. We know that we are laggards as far as the construction business is concerned and it is taking a lot of time to adopt new technologies.
“We had a first wave is disruptors in the real estate market which have been doing property leasing in a more efficient way which helped transactions and brought transparency to the market. Then we had a second wave of companies that are basically trying to help reduce all the transaction costs,” he says.
“When we say that 5% commission seems too much, the fact is that there is a huge amount of inefficiency that exists in the process of buying and selling property,” he admits.
On technology, he said that the movable costs were being transferred into a fixed fee but added that the underlying cost structure was also changing. That will have a profound effect on how business will be done in the future.
It doesn’t mean that this will impede the existing players, it actually means that the business model will be different. When transaction costs are reduced and you think about real estate about 15% of the financial assets are in real estate and as a financial asset it is not that financially attractive as it has a lot of problems.
It has a liquidity problem because it takes a lot of time to buy and sell. It has huge transaction costs and huge valuation problems. It can be 20% cheaper or more expensive simply because there is no transparency in the market.
When you look at these layers they are actually tackling these problems, making the transaction much cheaper, faster and adding transparency to the price. What that actually means is that when thinking about investing in real estate, it becomes more attractive. In the future, I expect a lot of money to be poured into this business because people will want to invest in it. Since transaction costs go down, property transactions will become more frequent.
There are, however, in Portugal, regulation problems and tax issues that factor in. When you look at Air BnB which is an accommodation service, wen you think you can do this kind of thing in the real estate market, then people can start looking at the property in a different way. We’re seeing a lot of disruption. Air BnB makes a lot of money but does not exist by itself. There are companies emerging that are helping Air BnB with its business model. You have companies that take the pictures, clean the properties, do the renovating and are specialised in how they prepare the houses to make them attractive to Air BnB customers.
It leads to thinking about the business where you have lots of small transactions and instead of making 5% or 10%, you start including this type of thinking in the model to make money.
Proptechs – big investment
Since 2017 there has been over US$12Bn invested in proptechs, last year alone almost US$20Bn and this year it will exceed this amount.
Taking the example of Casafari which has shown impressive growth with over US$5million raised from investors in Europe, Mila Suhareva has ideas of what is missing in the market and where prop tech is going.
“Our goal is to build a database that will resolve the root cause of all the markets problems. The market does lack transparency, and for the future we need to build transparency, certainty and faster deals,” she said.
The biggest problem for developers is not where and how to build but how to market properties. We can help you with all of this because we have up-to-date data, provide the exposure t the biggest network of real estate professionals (7,000+ agents using Casafari) on a daily basis.
A better market for all
“I think the real estate market, if you take a historical view, resembles the beginnings of the financial market where there is information gaps, fluid liquidity. Some people have the information, others don’t, and so the cycles are usually very hard” says Gonçalo Abreu of Alfredo AI.
When the market goes down it really plummets and when it goes up it soars. The role that prop techs are going to have, is to function like ‘dampeners’ working on the seller and buyers sides,” he continues.
“We want to make estimates and deal with a lot of problems that have been discussed, mitigating risk, making sure that there is confidence,” he adds, pointing to the startup’s success and its new partnership with a large bank and two new pilots with the insurance company Fidelidade while working with some of the largest real estate brokers.
“We saw that the property brokerage industry had a problem, with only 20% of the workforce is stable, the other 80% are always rotating. This means that it is precarious casual work and I think that this sector needs to be protected. Sometimes these agents are lost and don’t really know how to provide a valuation. Sometimes they put the prices too high and they don’t sell. Most of all information will make the market more liquid and better for everybody,” he concluded adding that the countries in the north of Europe worked in a transparent way and there was no reason Portugal could not follow the same path.
But what about if the big players don’t trust the new proptechs and are too small for them to manage and a syndicate of big players comes in to strangle innovation as has happened with Fintechs in the UK?
Sooner of later the European Union will issue a directive which will state that every transaction will have to be public which is what countries whose markets function well and are more resident to speculation bubbles do.
As is the case with Casafari, Alfredo and other proptechs is that when the government doesn’t regulate the market in a fair and transparent way, a technology solution steps in to redress the balance.
Nuno Gi of Mota Engil Renewing said the they truly believed cities are changing, all the traditional models in the energy sector, mobility and real estate are crying out for new business models, i.e., digital nomads and young families that cannot afford the high prices of homes.
“There must be a way of looking a this in different way by combining all these variables to find a smart synergy solution which integrates all these solutions.
“We envision a city with a big urbanisation process, one that is carbon neutral, so we are investing and helping all the companies to try and reduce their energy footprint through innovative services and smart solutions that integrate decentralised and digital energy, smart changing, mobility solutions as well as new housing concepts.”
About the speakers:
Mila Suhareva – Casafari
Created Casafari three years ago with co-founder Nils Henning who were living in Malaga, Spain and saw a need to ‘clear up the chaos’ concerning data in the housing market. Using artificial intelligence and data science, Casafari could work out how many houses were for sale on various estate agency and property sites and then analyse them one-by-one to see if all the data was introduced correctly. In its first year, Casafari netted 2,500 clients and had to move premises because it became so successful. Today Casafari is building their cleanest and most complete real estate database in the world with over 10,000,000+ property listings from 9,000+ sources in Spain and Portugal. The company’s aim is to bring transparency to prime real estate markets with metasearch+ competitive intelligence, helping real estate professionals stay ahead of the market by gaining real-time market data and thereby solving the chaos that exists in international real estate markets.
Miguel Santo Amaro, Founding Partner Uniplaces.
Uniplaces is an online student accommodation platform where students from any part of the world can reserve an apartment or room in a secure and easy way. It eliminates insecurity and worry over the process of finding “university digs” for any International student and facilitates the process of losing for and booking accommodation while helping landlords to rent their properties quickly and profitably.
Pedro Menezes Simões – EY-Parthenon
Is a global corporate strategy expert who launched EY’s Advisory strategy practice in Portugal that merged into EY-Parthenon in July 2019, he has been mentoring several startups. A corporate accounting consultancy, EY also provides end-to-end solutions for the real estate sector.
Nuno Gi – Business Developer Mota Engil Renewing
The co-founder of a pioneer brand company of steam healthy food – CentoeQuatro and awarded the 1st Honourable Mention for its innovative products at the Food and Nutrition Awards.
Mota Engil Renewing, a new business unit of construction giant Mota Engil, develops new business models for cities and companies, resulting in innovative services and smart solutions that integrate decentralised and digital energy smart charging, mobility solutions as well as new housing concepts.
Vasco Pereira Coutinho, Co-founding Partner of Kazzify.
Kazzify is a Portuguese startup to buy and sell houses without an intermediary. It charges a fixed rate of €1,999 which is only charged if the house is sold. Its online platform and application enables virtual viewings and doing business without using a traditional estate agent. Kazzify has a team of five led by Marta Gonçalves and operates in the district of Porto and Lisbon.
Gonçalo Abreu – Founding parter of ALFREDO AI
Alfredo Real Estate Analytics is a Portuguese startup founded in 2018 with the goal of organising the Real Estate market using Artificial Intelligence and Big Data. Gathering property data from multiple public sources, it has developed a Machine Learning algorithm that allows any real estate stakeholder to perform AI-powered appraisals of any kind of property in the Portuguese market. It launched its new platform on 21 November.
