The Stance Of Property Technology in Australia While Sydney Prices Regain Momentum

Property Stocks

Property market experts believe that for the real estate players to achieve a competitive edge in the current revolutionary times, where the baton lies with the tenants and residents, acknowledgement and embracement of technology should ideally be a huge cornerstone of their business strategies.

In today’s world, there are start-ups that have evolved to primarily focus on delivering solutions that can solve real estate owners’ and operators’ challenges, and complement their business, not redefine them. Cost savings, profitability and sustainability form the tripod stand of these start-ups which enhance the return on investment for real estate owners.

Property Technology Firms- The Concept

In the past few years, technology’s potential to transform the world has been more apparent than ever before, as we evolve watching it improve the quality of our lives and turning the global industry upside down.

A disruption in the tech space which has received the well-deserved traction especially in the past couple of years has been the evolution and establishment of property technology firms.

Often referred to as PropTech, property technology can be best comprehensively described as a collective term which defines start-ups that offer technologically innovative products or new business models for the real estate markets.

proptech

PropTech In Australia

The Australian property industry is amongst the most transparent across the world, and one of the strongest in the APAC region. It offers ample opportunities for the tech start-up companies to create and provide innovative solutions for the property market, and consequently, PropTech has been steadily gathering momentum in recent years.

With a huge leap of over 400% in PropTech companies in the past 5 years, there are currently more than 260 PropTech companies operating in Australia.

Charter Hall Group (ASX: CHC) along with Collective Campus is believed to have launched the country’s first ever PropTech, Accelerator. Sector-wise, residential PropTech leads the way, followed by Commercial and Retail.

Strategic partnerships and integrations with established players in these sectors are a great way to boost PropTech growth in Australia, which would propel smarter living and working. Predictions in the industry state that the budding industry will reach $20 billion next year.

Recent PropTech Stance in Australia

PropTech has been a hot topic of discussion because it is no longer a niche phenomenon. Even though it is dwarfed by relatively older concepts of FinTech (use of technology in the financial industry), the investment in PropTech has soared in the last two years.

While investors care about PropTech as they see it to be a lucrative but untapped market opportunity, a recent example (from Australia) has left the market in a state of flux:

After lodging its prospectus, on 23 October 2019, PropertyGuru- a South-east Asian real estate portal that runs digital property classifieds marketplaces abandoned its much-anticipated float on the Australian Securities Exchange.

The Company made the decision citing the uncertainty in the current initial public offering market, even though it had strong investor support from both global and Australian investors. The Company had provided an indicative price range of $3.70 to $4.50 per share and was likely to raise $380.2 million.

PropTech Summit 2019 

It is a globally accepted fact that the future would be centred around tech-enabled better services. The recent abandoning of a lucrative IPO would not define the entire stance of the PropTech stance.

In September 2019, the Australian PropTech ecosystem was discussed at the PropTech Summit 2019 in Sydney. With the funding pertaining to PropTech growing significantly across the globe, Australia is deemed to be a strong prospect considering the start-up numbers, with strong institutional interest in the sector.

The Summit conveyed that PropTech has been ensuring efficiency so that agents have additional time to have their own leads than banking upon the portals. Moreover, PropTech companies have competently been solving problems for consumers and transforming the industry and displacing portals and agents.

Sydney Prices Regain Momentum

While Australia welcomes PropTech players and provides a feasible platform for them to prosper, the protracted property plummet in the country seems to finally be fading away.

According to Data house, CoreLogic, the housing market made further progress towards a recovery in September 2019, catalysed by a strong rebound in Sydney and Melbourne where values were up 1.7% over the month, marking the fourth consecutive month of price gains in the two capital cities.

With higher population growth, lower unemployment and stronger jobs growth, NSW and Victoria have been providing a cushion to housing demand. The housing national value reported increase of cumulative 1.7% since May 2019 with the market finding its support.

The September results of housing market demonstrated that the housing market improvement is in fully blown across Sydney and Melbourne, while the other regions signalled a mixed picture.

More recently, Domain’s September House Price Report depict a remarkable recovery for Sydney prices over the September quarter, with house prices jumping by 4.8%, reportedly the first quarterly gains since 2017.

Even though Buyers may have missed the bottom of the market given the prices reaching a low last quarter, prospective buyers have the option to tap the advantage of the current improved affordability.

The reasons for the Sydney upswing are likely to be:

  • falling interest rates;
  • expectations of further cash rate cuts early next year;
  • relaxation of lending standards;
  • the re-election of the coalition government;
  • the length of the preceding downswing.

It would be interesting to await the future reports amid subdued income growth and affordability constraints.

The Property Stance On ASX

After the close of the trade session on the ASX on 25 October 2019, the S&P/ASX 200 Real Estate (Sector), XRE closed higher at 3,810.1, up by 0.9% or 34.6 basis points.

XRE’s YTD Performance (Source: ASX)

It is safe to state that with the PropTech space paving towards establishing its dominance in the Australian economy and the improving property prices scenario, the real estate sector seems to be a prospective attraction for the domestic and international investors.


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