PropTech: A New Definition
PropTech is a buzzword that different people are talking about different things. The 2017 definition emphasizes a “technology-driven innovation in the data assembly, transaction, and design of buildings and cities”. (Baum & Dearsley, 2017) and defined it as the interactions of Real Estate Fintech, Smart Building Technologies, and the Shared Economy in the Property industry. But then they further add ConTech (such as Computer-aided design) and LegalTech (such as smart contracts) into the schematic in 2020 (Braesemann & Baum, 2020), as shown in Figure 1.
However, this definition can result in an identity crisis as PropTech is defined as a combination of many X-Techs from other disciplines, PropTech itself becomes “empty” and is simply an application of other techs on property markets. Using their diagram to explain my argument, the un-overlapped portion of the PropTech bubble is still undefined.
In fact, it is not the application of technologies that matters, it is the innovations that help improve people’s lives that matter. Property is basically a necessity for providing a comfortable space and time. I suggest a new definition of PropTech as follows:
PropTech is the application of technologies on Property Innovations (Propinno) to facilitate some groups of stakeholders to better engage in the Property Processes.(Figure 2)
Here I introduce a new term: Propinno to emphasize Property Innovations. For example, Airbnb and WeWork are applications of the web-based peer-to-peer platform on subletting of properties. It is the innovation of subletting that make a benefit to the owners and renters. The digitized P2P platform helps reduce the transaction costs of engaging in subletting.
Here the verb “facilitate” means a reduction in costs, including transaction costs, and/or enhancement of transparency and risk management, etc.
More importantly, PropTech does not limit to “data assembly, transaction, and design of buildings and cities”, but can be extended to the whole Property Processes, including design and build, contracting and documentation, buy and sell, rent and share, maintenance and management, operation and use, rehabilitation and redevelopment, data analytics and legal analysis, etc.
The Techs may come from other disciplines, mostly from engineering and science. But the Propinno usually comes from the property market participants themselves, as they understand better the needs and wants of the stakeholders and have the strongest incentive to innovate for their own benefits. Take sharing economy as an example, co-housing and co-working have been very commonly used in the property markets, but it is limited to cooperatives, youth centers and retirement homes. With the advancement of P2P platform, Airbnb and WeWork make the innovations well known. However, the ideas of sharing space, time and money have been developing in the property markets for decades or even centuries to optimize the benefits of the owners/renters.
Yet, if we focus too much on P2P technologies, then we may ignore the more important component of PropTech, that is the Property Innovations. For example, even without using any P2P platforms, there are many other innovative concepts of sharing land, such as cross-lease and ground-lease, sharing external common parts, such as unit titles, sharing amenities, such as co-housing and co-working, and sharing internal corridor and entrance, such as subdivided units, can be commonly found in different parts of the world (Yiu, 2021b).
More importantly, the term Sharing Economy would limit people’s imagination to the current businesses in the sharing economy. In fact, Collaborations, Partnering and Joint Venture are similar ideas and have been developed in the property markets for decades. A case in point is the PPP (Private-Public Partnering) which includes Sales and Leaseback (SLB), Build, Operate, and Transfer (BOT), Design, Build, Finance, and Operate (DBFO), etc. have been very commonly used in the property markets. These partnering schemes are important innovations to solve the financing and development problems. They are potential candidates in PropTech.
Similarly, financialization is another major area of innovations in the property markets, which may or may not be involved in technologies. For example, REITs and unit titles are typical examples of subdividing ownership into shares. Mortgage is another example of subdividing payments. Nowadays, with the use of digitized technologies, house price index futures and crowdfunding investments on properties are possible. But basically they are based on the innovations of financialization. (Yiu, 2021c)
Since the term “technology” is not a definable term, people can only rely on examples to describe PropTech. That’s why more and more Techs are adding into the definition of PropTech. So far, we have Fintech, Smart Building Tech, SharedEconTech, ConTech, and Legal Tech, but it is quite easy to think of other Techs to add. For example, during the COVID-19 pandemic, we have introduced many facility management technologies (FM-Tech) to make work-from-home, e-shopping and trading-at-home feasible. It can revolutionize the whole property markets, as some people can choose to live far away from their workplaces to save living costs, the demands for office space and shops can substantially be reduced (Yiu, 2020). These are typical examples of applying technologies on property innovations to facilitate stakeholders to better engage in property processes, i.e. PropTech.
Lastly, educational technologies (Edu-Tech) would also be a potential area to contribute in PropTech. When students can study at home, campuses and schools can largely be changed to other uses. In the teaching and learning process, We are applying some latest technologies in our Property classes, such as Google Colab for data analytics, FBProphet for forecasting, Microsoft Azure for Machine Learning programming, Parabola for API and data processing, SurveyMonkey for sentiment analysis, GitHub for knowledge co-creation, VR for site surveys, etc. These Edu-Tech will help Property Students to get hands-on experience of the PropTech technologies and become more PropTech-able.
References
Baum, A. and Dearsley, J. (2017, in Derbyshire, 2019): What is PropTech, Unissu Online, 5 March. https://www.unissu.com/proptech-resources/what-is-proptech.
Braesemann, F. & Baum, A. (2020) The Oxford Future of Real Estate Initiative uses Crunchbase data to investigate the emerging PropTech movement, Crunchbase, July 24. https://about.crunchbase.com/blog/the-oxford-future-of-real-estate-initiative-uses-crunchbase-data-to-investigate-the-emerging-proptech-movement/
Yiu, C.Y. (2020) COVID-19 Revolutionizes Real Estate Markets, Medium, July 13. https://ecyy.medium.com/covid-19-revolutionizes-the-real-estate-markets-934787ce623a
Yiu, C.Y. (2021a) PropTech, Course Materials, PROPERTY 384, B.Sc. in Property, University of Auckland Business School.
Yiu, C.Y. (2021b) PropTech Analysis — Various Business Models of Subletting Properties, Medium, May 20. https://ecyy.medium.com/proptech-analysis-various-business-models-of-subletting-properties-199660fa
Yiu, C.Y. (2021c) PropTech Analysis — How Innovations Make Property Investment More Affordable? Medium, May 23. https://medium.com/discourse/proptech-analysis-how-innovations-make-property-investment-more-affordable-ff8d6fab97a5
