If there’s one business that encapsulates the hopes and dreams of the UK’s growing community of PropTech startups, it’s the online

estate agency Purplebricks. Founded just six years ago by brothers Michael and Kenny Bruce from the proceeds of their Midlands agency, the company had a meteoric rise, grabbing an estimated 7 per cent of UK property sales with its low-cost model, debuting on the AIM stock market in 2015 with a £240m valuation, and then launching into the Australian and the US markets.

But if it has made money for some, Purplebricks has also become a bellwether for the doubts and uncertainties that afflict PropTech. This year started with the US stockbroker Jefferies issuing a ‘sell’ note, claiming that the online agent sells only 51.6 per cent of the homes on its books within ten months (starkly lower than the 88 per cent claimed by the firm itself), and prompted a swift drop in the share price – as well as calls for online agents to be properly regulated.

In its simplest meaning, PropTech is the deployment of technology to make all things property – buying, selling, renting, moving, managing – easier, more efficient and more cost effective. In the last five years, it’s become a major focus for startups on both sides of the Atlantic and has attracted a wall of money from venture capitalists hoping to find the real estate equivalent of a Google or Facebook. According to Forbes and CB Insights, venture capital investment in PropTech was set to top $3bn globally in 2017 and, with the total value of housing in the UK alone worth some £6.8trn, according to Savills, it’s not hard to see why. Capturing just a tiny percentage of the £240bn spent on buying and selling properties each year in the UK is a tempting prize for any budding entrepreneur.

In a short time, PropTech has spawned an entire ecosystem. There are conferences, innovation clubs, accelerators, consultants and, of course, the investment teams that specialise sometimes exclusively in the PropTech area. One of these, Pi Labs (short for Property Investment Labs), bills itself as “Europe’s first venture capital platform investing exclusively in early stage ventures in the property tech vertical”, and has helped some 24 companies raise £26m over the last three years.

London has become the undisputed PropTech capital of Europe, with more companies centred there than anywhere else, and with

Technology first began to change the property world with the launch of online portals such as Rightmove

nearly two decades ago. Today, the so-called PropTech sector is booming and UK companies are

at the heart of it. Alexander Garrett reports

MOVING FORWARD?

PROPERTY

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New modelPurplebricks had a meteoric rise after its AIM listing in 2015

entrepreneurs attracted from across Europe to launch their startups in the UK. Many are located alongside other tech companies in locations such as Tech City in Shoreditch.

But while it’s only in the last two or three years that PropTech has become a potent buzzword in investment circles, the underlying trend to adopt technology in real estate has been taking place for some time. In his blockbuster report PropTech 3.0: The Future of Real Estate, Andrew Baum of Oxford University’s Saïd Business School traces it back to the mid-1980s, when the property industry began putting computers and data to use – an era designated PropTech 1.0. This wave gathered pace with the launch of online search portal Rightmove in 2000, followed by the likes of Zoopla and OnTheMarket, and Trulia in the US.

We are now in the era of PropTech 2.0, says Baum: “A new explosive wave of innovation, investment and entrepreneurial activity.” It has been unleashed by developments such as ecommerce, social networking, open-source software and the multi-platform world. At its heart is the desire and ability to make use of the plethora of devices available to consumers, most notably smartphones.

Baum says that what is really at stake in PropTech 2.0 is whether the technology can help put real estate on a level playing field with other asset classes such as shares and bonds – overcoming limitations that range from its built-in deterioration and obsolescence to the illiquid nature of property transactions, as well as the expensive and time-consuming nature of property management.

“In retrospect,” he says, “PropTech 2.0 will be judged to have been a highly successful revolution only if it releases the asset class and the industry which surrounds it from its limits. Will PropTech be as enduring as the industry on which it has built its foundations? Can it make fundamental changes to the way property is held, traded or valued?”

In other words: can PropTech truly disrupt the property market, as so many have claimed? Property expert Henry Pryor is an avowed sceptic. “It’s the latest version of the dotcom boom,” he says. “The vast majority of the funds invested in PropTech will be wasted. While some applications will benefit from automation, a lot of investors will end up losing all their money.”

A key flaw, adds Pryor, is “when people believe buying and selling can be done using an app on your phone”. The human element is vital in property transactions, he argues, whether that’s understanding ‘intangibles’ such as the view from a kitchen window, or simply providing the reassurance of personal interaction. Many PropTech companies are jumping aboard a bandwagon, providing solutions where there isn’t a problem, and few, if any, are making money, he alleges.

James Dearsley, founder of The Digital Marketing Bureau and a leading commentator on PropTech, has a somewhat different perspective. “PropTech is one small part of the wider digital transformation of the property industry,” he says. “Property is the second biggest asset class but it’s very traditional. It’s not just about technology – it’s about a mentality change among consumers and the industry itself. Joe Public is very well versed in using iPads and

SOFTWARE FOR HARD HATS

Alongside the property industry, construction is also facing disruption as technology offers a range of new ways to build more efficiently and with higher quality control. Inevitably it has coined its own name – ConTech. Virtual reality, augmented reality, autonomous vehicles, robotics, wearables and prefabrication are all areas where applications are being developed, and their range is truly diverse.

One of the most high profile examples is robot bricklayers. American company Construction Robotics has developed a robot called SAM100 that can lay a brick every 8.5 seconds and is already being deployed. An Australian robot, Hadrian, can build a house in two days. Where robots can’t be deployed, exoskeletons are a new technology that can turn construction workers into stronger ‘superworkers’, able to lift and wield tools as if they were superhuman. And 3D printing is another headline-grabbing technology that has been used to rapidly accelerate the house-building process. Last year a Chinese company, Huashang Tengda, demonstrated the construction of a two-storey house in Beijing in 45 days, which was ‘printed’ entirely on site. 3D printing may find more widespread use in prototyping of new building components, rather than actually constructing buildings.

VR technology is being deployed mainly in Building Information Modelling (BIM), where it can be used to provide a virtual walk-through of a construction project. A VR system used on Crossrail by Laing O’Rourke is being developed for industry-wide use by design visualisation studio Soluis. Igloo Vision is a UK company that uses dome-based VR

experiences to bring projects to life for the construction industry. Drones are also already being deployed in UK construction. Their main use is for inspection – to monitor safety, security and construction progress – but they can also be used for mapping and surveying, as well as to deliver building materials on site. There are more than 2,000 drone businesses in the UK, and construction has been identified as the industry where take up is the fastest.

The Internet of Things also has vast potential to transform the construction business through a wide range of applications, including remote operation of tools, replenishment of materials,

tracking of tool locations and the maintenance of equipment.

Many of these technologies are being developed by large engineering or construction companies, and startups are less common than in the real estate area. One UK firm that has successfully raised investment is Pavegen, which uses ‘smart’ pavements to harness energy from pedestrians’ footsteps to power street lighting. Each step triggers a flywheel, which generates power that can be stored. It’s already been put into practice on a site at Bird Street in central London, as well as being demonstrated around the world, and Pavegen has raised £2.3m in funding.

ConTech specs Clockwise from top: Pavegen can power street lighting; the world’s first freeform 3D-printed house, by WATG, will be built in 2018; the SAM100 robot can lay a brick every 8.5 seconds

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phones and they have an expectation that technology comes easy. So they expect buying a house to be easy, they expect working in a building to be easy. And they want solutions that suit their wider lives.”

The solutions are certainly there. Today, our Millennial couple – let’s call them Matthew and Jessica – can fill their phones’ home screens with apps designed to help them search, find, secure and finance their home, as well as manage it. Using the likes of Zoopla or Property Detective they can research schools, healthcare, transport and crime stats by neighbourhood. With Rightmove or the various other portals they can narrow down their search to a hit list of specific properties. In many cases 360° or even virtual reality tours will let them look around the property in detail before deciding whether to view it; and the viewings may also be arranged by an app. They can raise the necessary finance with the likes of online mortgage brokers such as Habito, Trussle or LendInvest, and even take the sweat out of their move with the likes of Moving Van or MovePlanner.

If Matthew and Jessica are planning to rent, there’s a ton of apps purpose built to find the right property and deal with agents. And for sellers – and landlords – there are apps and online tools for just about every process you can think of.

Nevertheless, Dearsley sees a real distinction between what’s happening now and what will happen next. “The biggest opportunities we’re seeing in the short term are about innovating and increasing efficiency in the current marketplace – improving the current ecosystem,” he says.

The real disruption, he adds, will come in the next phase – what Baum has called PropTech 3.0, when technologies such as blockchain and AI provide the means to effect transformation. For example, the use of blockchain to record title deeds could spell the end of the Land Registry in its current form. Likewise, recording every stage of the conveyancing process on blockchain will disintermediate the conveyancers, speed up the process and

The real disruption will

come with technologies such

as blockchain and AI

enable buyers and sellers to see exactly what stage they are at.

AI will play an important part, says Dearsley, in plans for smart cities: “The homes of the future won’t run on human intelligence – they will rely upon analysis of data, for example whether the temperature remains on trend.”

For now, he believes, hyperbole and expectations in PropTech have reached a peak, and it is time for a period of consolidation. “In the next 12 to 18 months, I expect we will see some companies go out of business because they are not big enough, and we’ll also see more and more examples of collaboration.” That could mean traditional property companies snapping up much smaller PropTech players who have a product that will enhance their own service.

Estate agents, says Dearsley, are not going to disappear. “There will always be a need for someone to hold your hand through a property transaction. But there will be more self-service options – what PropTech has shown is that people have an appetite to do more and more of the process for themselves.”

WHO’S WHO IN PROPTECH LAND

SELLINGOnline estate agents – both for selling and letting property – are the most high profile and contentious part of the PropTech scene. Purplebricks is not just the biggest but has also raised the most cash – more than £100m, including £58m at its IPO in

Room for changeYopa’s Daniel Attia. Below: PropTech commentator James Dearsley, founder of The Digital Marketing Bureau

2015 – and is profitable in the UK. The Purplebricks model involves charging sellers a fixed fee – average £1,138 – whether or not it succeeds in selling their home. Purplebricks relies on ‘local property experts’ to value the property and create its online listing, but sellers can manage viewings themselves to keep their

costs to a minimum. There are plenty of other

online agents – but most have relatively few

properties on their books. Leading the challenge is Yopa, started in 2014 by CEO Daniel Attia with Andrew and Alistair Barclay, grandson and son of Telegraph owner Sir David Barclay. It has since raised £60m

from Savills, the Daily Mail & General Trust, and

LSL, owners of estate agency Your Move – all ‘arm’s length’

investments. With 3,300 properties listed, Attia says Yopa is now the seventh biggest agency listed on Rightmove. He also says it is one of the only true hybrid agents, with a 100-strong exclusive network of qualified estate agents representing it locally. Yopa has differentiated itself from Purplebricks by offering a ‘no-sale, no-fee’ option to sellers. Says Attia: “The biggest complaint facing online agencies is that we are not motivated to sell when we take the money upfront.”

Other serious competitors are Emoov and House Simple. Emoov, founded by Russell Quirk, has raised around £12m in total from investors including Dragons’ Den’s James Caan, and leading venture capital fund Episode1, and also offers

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no-sale, no fee. HouseSimple has a similar approach and has backing from Carphone Warehouse founder Sir Charles Dunstone, who has led investors putting in around £38m in successive funding rounds. Also vying for a slice of the action is Tepilo, set up by TV presenter Sarah Beeny. Other companies in this segment have a more specialised service to offer. Nested, set up by Matt Robinson, founder of GoCardless, offers sellers guaranteed cash within 90 days, allowing them to become cash buyers. Hystreet helps traditional bricks and mortar estate agents to set up an online offering. And EyeSpy360 provides virtual tours to agents – and individual sellers – to help them showcase properties online.

SEARCHINGThe main property search portals in the UK – including Rightmove, OnTheMarket, Zoopla and PrimeLocation – largely pre-date the current wave of PropTech, and new companies that have set out to earn their revenue from buyers have not succeeded in raising the same amounts of investment as the online agents – thanks to the fact that it is sellers’ fees that fuel property transactions.

One company that has found a significant backer is Property Detective, which has signed a long-term partnership with portal Zoopla. It allows house hunters to download a report on any postcode, giving details on local schools, transport, shops and so on, in return for a subscription fee.

Nimbus Maps is another search-oriented company, which provides data on specific sites, mainly to property professionals. Upshoot is a portal aimed at people wanting to buy property to do up, and lets you search properties in an area based on development potential.

There is no shortage, meanwhile, of newer portals seeking to cash in on the Generation Rent phenomenon by helping renters to find properties. Movebubble is an app aimed specifically at those looking to rent in London, and has raised more than £2m in funding. It offers letting agents access to pre-qualified renters.

SPCE, meanwhile, is a search portal aimed at students looking for accommodation in the UK, including those searching from overseas. It raised its initial capital from crowdfunding platform Seedrs and is reported to be planning a new funding round.

FINANCEMortgages are another key PropTech area, where property meets fintech, and there are a number of

contenders pitching to provide home finance online. Trussle, founded in 2015 by former Bank of America Merrill Lynch analyst Ishaan Malhi, is leading the pack and has raised more than £5.5m from investors that include Zoopla. Trussle aims to make switching mortgages as easy as switching utility provider and alerts borrowers when a better deal comes along. Its closest competitor is Habito, founded by an ex-employee of Wonga, Daniel Hegarty, which analyses 11,000 products across 70 lenders to find the best deal for you. Habito has raised more than £27m so far, with VC house Atomico leading the latest round.

Bricklane.com is a company aiming to help first-time buyers save to buy through investing in rental properties, and has the backing of Zoopla. Ahauz, meanwhile, positions itself as “the bank of mum and dad for everyone” by helping first-time

buyers to raise the money for a deposit. It has raised £2.9m so far.

Other variations include LendInvest, which provides peer-to-peer lending, mainly to property professionals and SMEs, through investment from individuals, corporates and institutions; and Property Partner, which crowdsources investment in residential property. Canopy is a business that sets out to

replace security

deposits for renters with a simple insurance policy, through establishing their credit history. It has backing from Direct Line and Experian, among others.

MANAGEMENTOngoing management of property is another area ripe for PropTech startups, especially the management of rental properties, which is a notoriously time-consuming process. Goodlord was co-founded by a former Foxtons estate agent, Richard White, and sets out to make property rental – and setting up a new tenancy – easier for agents. It has raised £9.2m in backing, with a significant slice coming from Silicon Valley in the shape of Ribbit Capital. However, it has been one of the first in the sector to experience a serious setback, with almost 40 redundancies at the start of 2018.

Rentr is an app that performs a similar service for DIY landlords, as well as a website offering advice and information.

Its comprehensive offering encompasses advertising properties, viewings,

contracts, rent and accounts and repairs and maintenance.

AskPorter, meanwhile, is one of the first PropTech companies claiming to make use of Artificial Intelligence. Described as an AI-powered property management platform, it’s essentially a messaging system for landlords and

tenants that makes use of a digital assistant, a bit like

Amazon’s Alexa. The company has raised more than £500,000 from investors

including James Caan and Pi Labs. Another web-based service, FixFlo,

focuses specifically on maintenance and repair issues. Its software enables tenants to report issues, uploading photographs where necessary, whilst also allowing landlords to farm the work out to contractors and report back to tenants. Fixflo was set up in 2013, with the former CTO of Friends Reunited as one of its two founders. It initially had backing from Zoopla, but that has since been unwound ‘by mutual consent’. And finally, another startup, focusing this time on home improvement, is Opun, which is backed by insurer Aviva. Home owners can plan their improvements online, get advice from specialists, and then receive quotes from contractors. They can also manage the project from Opun’s app.

Alexander Garrett is a freelance journalist who writes about a wide range of business and property issues

Ongoing management of property is another area

ripe for PropTech startups

Home advantageSarah Beeny is founder of

online estate agent Tepilo. Below: EyeSpy360 provides

virtual tours of properties

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