The rise of technology has revolutionized the property sector but is Hong Kong – the world’s most expensive real estate market – ready for the proptech revolution?
Property technology, or proptech, is a fast-growing segment in the information technology sector. Technologies that proptech utilizes — including big data, virtual reality, 3D printing, blockchain, artificial intelligence and internet of things — can manifest in different ways, such as hardware, software, materials and construction method.
According to a Wall Street Journal report, proptech attracted over US$10 billion in capital investment throughout the world in the first and second quarters last year.
Proptech has enjoyed a robust development in Europe and the United States, with New York and London seen as key proptech centers. While Hong Kong’s real estate market has seen active trading, the development of proptech is still at an infant stage. Proptech products and services are limited on the market, and most of these products focus on the listing of property for sale and for rent, as well as co-working space. Property trading platform SmartME and Squarefoot.com.hk website are two examples.
“I am afraid that I wouldn’t have a job in the future,” says Leo Lo, Founder of Asia PropTech, an association connecting PropTech startups and investors in Asia. Coming from a surveying background, he realized that the work of surveyors could, to a certain degree, be replaced by the use of artificial intelligence or big data in analyzing assets or valuing properties.
Leo is unhappy with the current situation in Hong Kong and said that it isn’t easy to promote proptech in Hong Kong because of difficulties finding support. He said the challenge could be addressed by looking into two areas.
The first challenge is the lack of incentive to innovate. “My peers in the industry resist change,” he said. The population of Hong Kong keeps increasing, and with a small landmass and a convenient transportation system, developers and real estate agents have no incentive to innovate. “It’s incredibly convenient in Hong Kong. It almost feels like there are more realtors on the street than convenience stores,” Leo noted.
In Finland, Leo saw how people there had already used cloud computing for portfolio management. Yet in Hong Kong, people still use Excel sheets. As for blockchain, he believed the technology would become even better – he analogized blockchain as an expressway and artificial intelligence as a supercar: “A supercar needs to move on an expressway to demonstrate its prowess.”
As to which technology is more suitable for proptech innovation, Leo believed that artificial intelligence is more important than blockchain.
“Artificial intelligence requires lots of data, and the most pressing thing the industry needs is data,” he said. “We are not talking about data mining. The fact is we might not even have the ability to achieve data standardization.”
The second challenge comes from the lack of open data. Leo said that corporates are not willing to publicize information and the lack of transparency has resulted in a lot of unnecessary cost. Although Leo understood why companies treated information as a commercial secret, he is of the view that the government can take the lead on open data. For example, the Rating and Valuation Department has information about the annual valuation of properties in the city, but the government hasn’t considered using the data to help develop proptech.
He suggested that the Hong Kong government should follow in the footsteps of the Singaporean government by proactively releasing data to help advance the technological development and transformation of industries relating to facility management and the buy and sell of properties. He said the Hong Kong government has been slow in promoting the use of technology. “The government, on its own initiative, can definitely do more. It is unrealistic to rely on businesses to release their own data,” he said.
In early 2018, Singapore announced a new development blueprint for the real estate sector. The key strategy was embracing innovation and making good use of technology. In the same year, Asia PropTech organized meetings between the real estate sector and the Development Bureau, Lands Department, and Commerce and Economic Development Bureau. Proptech companies and senior executives from key industry players were among the participants.
The oligarchy nature of Hong Kong’s real estate industry, the lack of enthusiasm in venture capital financing and the conservative tendency of Hong Kong investors all act as a drag on the growth and development of proptech in the city. “Startups will quickly go south if they lack the capital to fend off big corporates,” Leo said.
As most local real estate companies are publicly listed, they are conscious of shareholders’ concerns about corporate performance. If investment in a startup doesn’t increase short-term profit or lower the cost, the management may shy away from investing in startups because of internal pressure.
Amid all the hurdles, Leo believes Asia PropTech can fill the gap by providing a platform to link startups with industry leaders. The objective of establishing Asia PropTech is to empower proptech startups so that they can help each other and develop their businesses further. In the end, whether Hong Kong’s proptech startups can become big corporates and conquer the fast-growing real estate markets in Asia depends on the government and the vision of the industry and its people.
For startups, the platform can help expand a company’s scale and raise capital. It can also help organize members so they can express their demands to the government as a group. On the other hand, Leo also found that some real estate companies have started taking innovation seriously by adding a new role of chief innovation officer.
With Hong Kong’s active real estate market and top property prices, Leo saw the potential of the Greater Bay Area, including Hong Kong, to become a proptech hub. The situation before the Covid-19 pandemic suggested that Hong Kong could become a proptech testing ground in the Greater Bay Area, as Shenzhen has a strong tech base and Guangdong Province has good universities. Together with capital coming from large real estate developers who made their fortune in southern China, these factors could help the development of proptech in Hong Kong, he said.
He also suggested that technologies developed in Hong Kong could be deployed in the Greater China area and Southeast Asia. To this end, Asia PropTech’s labs embrace university-industry-government partnerships, and the work to set up these labs in Malaysia and Guangzhou is moving ahead. He hopes to be able to set up four or five more strategic research points in Asia within three years.
Asked whether Hong Kong lags behind the global proptech revolution, he said: “We have the opportunity precisely because we are falling back, and this opportunity is big and wide.”