Through the effectiveness of digital technology, proptech introduces a new concept to the current property industry. The Korea Association of Realestators and a proptech company named Artiwealth proved this new trend by making a contract on March 13th. Furthermore, there is no question that proptech will take a crucial role in the future real estate market. However, it is also true that proptech is at odds with the existing property industry. Therefore, the Sungkyun Times (SKT) introduces the issues proptech brought to the field and suggests ways to move forward.
What Is Proptech?
-New Platforms Brought by Proptech
Proptech refers to the grafting of the property industry and Information & Communication Technology (ICT). Among various classifications of proptech, the brokerage industry, which facilitates property sales to consumers, and remote technology, which carries out construction and interior design with the tools of the Fourth Industrial Revolution, are drawing the most attention. RSQUARE, for example, is a firm focusing on commercial property brokerage that offers ease to clients by replacing tasks like transactions and other businesses. Through online applications, proptech companies also grant convenience to consumers in a familiar manner. The most famous example is Zigbang, an online platform specializing in domestic real estate that allows users to search for rooms in specific areas. Lee Seo-yeon (Freshman, Social Sciences) said, “Compared to other online communities like Naver Cafe, Zigbang was especially convenient as it offered me various types of rooms with just a few clicks."
-How Proptech Jumped on the Bandwagon
The market size of proptech continues to grow geometrically. 2022 research by the Korea Proptech Forum (KPF) shows that there were 368 domestic proptech firms as of August 2022, which is 14 times higher than in 2019. For such an expansion, changes in the market caused by the coronavirus disease 2019 (COVID-19) took a huge blow. Real estate businesses, including brokerage, were primarily conducted offline, but the pandemic brought limitations to the industry as people minimized outdoor activities. As a solution, the industry made a breakthrough by utilizing ICT. According to 2022 statistics by KPF, the cumulative sum of proptech investment was \5.3 trillion as of July 2022. The recognition of proptech’s value caused such vast investment, but governmental assistance also played a huge role. In December 2020, the Ministry of Land, Infrastructure, and Transport unveiled the First Property Service Industry Promotion Basic Plan to financially assist the diversification of Korea’s proptech industry. Furthermore, Korea Real Estate Board (REB) conducted a proptech village inauguration event in January 2022 to offer a workspace for proptech startup companies to develop inexhaustibly. Hence, the market growth due to the pandemic and governmental support nourished the cornerstone of the proptech paradigm.
The Issues beneath the Veil of Convenience
-Shortcomings in Data and Transaction
The credibility issue brought on by the inflation of transaction data is an ongoing problem. Through online property platforms, consumers can quickly search for an ideal property, but this applies the same to the dealers. Some brokers abuse the features of platforms to lure customers by posting fictitious or overstated “bait properties,” which leads to distrust. Data from the Property Sales Clean Management Center indicated that there were roughly 17,000 complaint reports of fake postings in the first quarter, which increased to 41,000 in the fourth quarter of 2019. Proptech firms have responded with means to kick out users that post deceptive information, but they were only short-term solutions. Moreover, reliability concerns also soared due to costly property investments. In the age where non-contact became customary, proptech businesses consistently adhered to the ideal of presenting innovative spatial experiences and delivering efficiency through a completely contactless service. In every property transaction, a registered document of the property is required for verification, and various identification files need to be submitted. Since data replication is easier online, a trustable security system is indispensable. However, as solid security systems are not fully established in proptech platforms, numerous transactions involve verifying property information online, then tying up the deals in person. Therefore, despite its ideal, there are obstacles in categorizing the proptech industry as a fully contactless service.
-Endless Conflicts with the Existing Industry
Meanwhile, there are two primary issues proptech companies are dealing with in the traditional property market. The first problem lies within the field of intermediation in the housing market. It is a challenge for proptech firms to enter the existing industry where its network is predominant with individual realtors and small businesses. Proptech corporates with tremendous information and vast funds would only be seen as a threat, particularly for individual brokers making a livelihood from their job. The active involvement of private licensed agents is necessary to lead the growth of proptech platforms; however, they merely recognize large proptech companies as a threat to their position. Also, as proptech companies have not yet established an interdependent structure, its entrance can encounter significant opposition from small businesses. Conflicts also arise regarding appraisal and assessment. Some proptech corporates, including Big- Value, have introduced platforms that offer estimated real estate prices using an Automated Valuation Model (AVM). However, the AVM has limits, as determining property prices through technical analysis is an unclear process. Also, there are doubts about whether the evaluated price is truly comparable to the actual cost. The lawsuit filed by the Korea Association of Property Appraisers (KAPA) against Big- Value ostensibly demonstrates this issue. In May 2020, KAPA claimed, “We had filed a complaint because Big-Value was carrying out an appraisal even though it was not a certified statutory.” Likewise, endless strings of conflicts in brokerage and assessment clearly illustrate a clash between the conventional real estate industry and proptech companies.
To Overstep the Limits of Proptech
-Make Credibility into Reality
To start with, Virtual Reality (VR) can be one strong countermeasure against poor transaction data quality. The revolving of inaccurate data can be prevented using VR technology by offering virtual tours of property spaces. Additionally, VR may effectively resolve time and cost issues resulting from offline businesses. For example, Zigbang allows customers to investigate rooms through a VR Home Tour service that can pan in different directions with the work of 360-degree cameras. Next, blockchain technology can contribute to securing the dependability of the platform’s transactions. Adopting blockchain can empower proptech firms to fully resolve security issues and ultimately achieve a completely contactless service. To further enhance security, blockchain can simultaneously process and encrypt data, allowing various transaction data to be stored in multiple computers connected to a central server. In fact, an existing rental management service named Home Button saves lease contract information in the blockchain to guarantee transparency and reliability.
-Build Harmony with a Seamless Strategy
Breaking down the barriers between offline and online businesses is the first step to take. A groundbreaking resolution is to introduce a Seamless Strategy. Seamless Strategy refers to the process of making customer service seamlessly deliver across both offline and online platforms. For instance, several companies in the financial sector apply a Seamless Strategy to provide a one-stop service with no need to visit a bank. Such implementation of seamless tactics in the finance sector must also be applied to the property industry, as it will lead to changes in the industrial structure and offer innovative services while ensuring both efficiency and dependability. “The emergence of proptech is an inevitable occurrence derived from equal rivalry and consumer choices,” said an official of the KPF. “Thus, for win-win development, the existing industry should empathize with proptech firms in maximizing public welfare, along with the help from the government.” As mentioned, the phrase win-win is anticipated to be a crucial term that provides a direction in handling further conflicts.
The real estate market is in a transitory phase resulting from changes brought about by proptech companies. In the new paradigm, first, proptech firms must thrive to provide refined data. Furthermore, the current property industry needs to grasp a seamless approach. Such endeavors will result in an organic link within the industry, establishing industrious harmony.