The future of the real estate sector is built on the pillars of proptech entrepreneurship

The real estate sector continues to be one of the most solid investments in the market, although it faces criticism linked to the problems of access to housing, especially among young people. Proptech entrepreneurship, which puts technology at the service of efficiency, is gaining relevance with solutions such as SmartHousing, the digitalisation of  the sales process or the integration of various services.

The property market has experienced some turbulent years. Throughout 2020, as a consequence of the pandemic, real estate selling in Spain fell by 17.7%  compared to the previous year, the biggest drop in more than a decade. In 2021, the market recovered with a year-on-year growth of almost 35%, and in 2022 it grew again: in total, real estate investment reached €15.4 billion, 35% more than the previous year. Proptech entrepreneurship has been an active participant in this new upward trend, with an investment of 824 million euros between 2020 and 2021.

The real estate market thus regained the ground it had lost to renting, and investment in property is currently one of the most stable in the market. But in a context of global slowdown, the purchasing power of users is constrained by rising mortgages and inflation, and with counteracting factors such as the tightening of the conditions for accessing a mortgage. Companies that are committed to technological solutions focused on making home buying and selling more accessible and flexible are positioned as the best allies of the sector in the coming months.

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The proptech entrepreneurship situation in 2023

The real estate sector closed 2022 with some 640,000 transactions in Spain (more than 13% more than in 2021), according to the estimates of the Solvia Market View 2022 report. But this same document points to a decline in sales for 2023 of between 10% and 15% in view of the announced rise in interest rates by the European Central Bank, as well as the increase in housing prices, predicted at between 1.5% and 2.5% year-on-year. The rental market, on the other hand, is associated with a specific descriptor this year: tensioned.

In Latin America, the UN Economic Commission for Latin America and the Caribbean (ECLAC) predicts a possible drop in inflation levels in 2023, which would have a favourable impact on the real estate sector by reducing the cost of construction materials. But the OECD points out that the region will also be affected by the slowdown, with growth prospects of between 0.5% and 2.6% in 2023. In a region that suffers from specific problems in access to housing, such as the high rate of economic informality, which hinders access to financing, and rapid but poorly planned urban growth, the Inter-American Development Bank predicts that proptech will play a fundamental role in solving the crucial needs of the population.

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Innovative startups, the key to change

The real estate sector has always been very traditional, and has responded to the economic, social and political situations of each moment as they came along,” states Sonia BentuĂ©, commercial director of Unlatch in Spain. “But it wasn’t until the pandemic hit that it became absolutely apparent that it needed to become more professional and equip itself with tools that would allow it to convey a different image to customers.” Unlatch, a French startup, expanded its operations to Spain in 2021 to meet this need detected on the road to modernisation of the sector. Its solution? A B2B software platform that digitalises the real estate sales process and integrates tools from other companies. “What we need to do is establish synergies and offer a global service to the end customer,” she states.

"What will make us strong is to establish synergies and offer a global service to the end customer"

Other companies focusing on proptech innovation are positioned as a lever to promote growth in the sector. Among them is Clikalia, the Spanish startup that has received the largest round of funding to date (led by Fifth Wall, a fund through which BBVA Spark invests in companies that decarbonise the construction and real estate sector), and which has expanded its solution to cover rental options, buying and selling, insurance and even removals. Another iBuyer, —companies that acquire homes quickly supported by technology—, the Colombian Habi, achieved  last year the status of unicorn (startups that reach a valuation of more than US$1 billion before going public). Its Mexican subsidiary, Tuhabi, closed 4,000 deals in five cities during its first year in the country—where it landed in September 2021—and plans to continue expanding with partners such as BBVA Spark, with which it recently signed a financing agreement worth 400 million pesos (20 million euros).

There are also startups that are betting on marketplaces for buying, selling and renting property, such as the Chilean company Houm; or on real estate crowdfunding, such as the Argentinian company Bricksave. Others facilitate access to mortgages, including the Spanish Colibid or the Mexican Yave; or are recovering the rent-to-own model to help young people, such as the Spanish company Libeen. The latter bases its business on the SmartHousing or “rent-to-own 2.0” concept, as described by co-founder JosĂ© Manuel Cartes. Through its website, users can access a home by paying a small amount and save monthly rent money for a fixed period of time until the amount of the down payment for a mortgage (equivalent to 20 percent of the total value of the home) has been accrued.

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“The big problem in recent years, which has not yet been solved, is precisely access to housing for young people and the middle class“, explains Sofia Iturbe, COO and co-founder of Libeen. “The circumstances we have experienced in 2022, such as rising rates and inflation, make it even more impossible to save money.” Last spring, the company raised 2.5 million euros in funding and currently has almost 40,000 registered users. Their forecast is to continue growing: “I believe that SmartHousing is going to be the new way in which these groups buy their homes, because it is a product adapted to them,” Cartes predicts.

The numbers support his prediction: despite the fact that the price of rent has experienced a year-on-year increase in 2022 of 8.4% according to the website Idealista, and that it is comparatively more expensive than a mortgage, the high cash value of the down payment is a major obstacle to accessing mortgages, especially for young people. Solutions such as Libeen’s not only modernise the industry, but also make it more accessible.

"SmartHousing is going to be the new way for young people and the middle class to buy their home"

A commitment to the present and the future

“I am convinced that the real estate sector has no way forward other than digitalisation and professionalism, because it is facing a buyer who is increasingly prepared, technological and who is looking for convenience in their dealings,” states Sonia BentuĂ©, of Unlatch.

The solutions proposed by entrepreneurs, in addition to offering the technological tools demanded by new consumers, can fulfil a social purpose. Encouraging the purchase of real estate is a way to avoid the impoverishment of society, according to JosĂ© Manuel Cartes, of Libeen. “If we don’t, people may reach retirement age with no savings and no housing. And if this problem affects many individuals, it will become a social problem.”

The fact that technology has the potential to build a fairer, more resilient and more efficient society and industries is something that drives the work of many entrepreneurs. Applied to the real estate sector, it is also positioned as a key element to structurally revolutionise the housing blueprint from its very foundations.

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