You know that Real Estate is one of the last sectors to embrace innovations.
But now things are changing.
There were billions of dollars invested in a real estate transformation, creating new real estate models and features for real estate platforms.
Around $16 billion were invested in real estate-related startups by VCs in 2019 alone.
So what does 2020 hold? What real estate trends are going to disrupt the real estate industry in 2020?
State of Real Estate Market and Market Predictions
The real estate market has always been an alluring industry for investors. From 2010 to 2017, investments in digitalizing the real estate industry have risen considerably.
Investing in real estate started from $33 million in 2010 and has reached over $5 billion in 2017.
However, 2019 has worried many that the industry was starting to become over-invested. It became typical, especially with WeWork. It is a real estate company that offers shared spaces for tech companies and Kattera, a technology-driven offsite construction company that is backed by SoftBank.
In view of this, it is expected that in 2020 investors will be more careful about investing in real estate.
Nevertheless, new features will continue to appear on the proptech market and leading investors to keep investing in real estate tech companies.
Predictions for the Real Estate Industry
- Value of the real estate industry: According to the Business Research Company, the real estate industry will reach a value of nearly $7227.13 billion by 2022.
- New features for real estate tech startups: The startups that use AI and Big Data are likely to receive more funding since they will be the ones who automate different segments of the real estate industry. Virtual tours will be highly in demand and will be integrated on both leasing and buying platforms.
- New business models: iBuyer, is an example of a non-traditional business model in the real estate industry. It uses modern technology to make property selling and buying easier by means of using an automated valuation model. Since iBuyer’s first appearance, many customers have had to decide who to turn to first: real estate agents or iBuyer. That is why it is anticipated that new platforms that will offer an automated buying and leasing experience will appear.
- Competition on the real estate market: The real estate market is going to become even more competitive since there will be low mortgage rates and not enough properties for sale. The bidding war for properties will grow and drive a 6% price growth in the first six months. Later on, the demand and supply will stabilize and cool down to 3%.
- Influential issues on the real estate industry: Besides a possible lack of investments in the real estate industry, there are some other issues that might influence the landscape of the real estate market:
– Economic issues: job and income growth, available qualified labor, interest rates, cost of capital, and capital availability.
– Political issues: the political landscape and government budget issues.
– Development issues: construction costs.
- Real estate disruptors: Furthermore, according to the Emerging Trends in the Real Estate 2020 survey, the real estate market will be highly influenced by the following disruptors:
Real Estate Trends in 2020
Each year, we hear many assumptions about the real estate industry; some play out and some turn out to be false beliefs.
Some people believed that 2019 would be the year of the real estate crash, but as it turned out there was only a slight reduction in the real estate market.
We have narrowed it down to the truest real estate trends that are going to take place in 2020.
1. Millennials are the major property buying group
Statistics: The real estate market studies have shown that Millennials were ranked as the biggest group of property buyers in 2019 in the USA. The same real estate trend is seen in Europe.
It didn’t just happen last year. Millennials have served as the major property buying group for the past six years in a row. So, it is no wonder that this trend will continue to grow in 2020. Millennials are expected to account for 45% of the real estate market in 2020.
Embracing new ways of research. Unlike other generations who used real estate agents to sell, rent, or buy a property, Millennials are using the Internet to research before hurrying up to buy a house or a flat.
According to the NAR Real Estate report, 81% of older Millennials found their home through a mobile app in 2019.
Moreover, Millennials are 20% less likely to work with a real estate agent and are twice as likely to use social media networks to find homes, according to the 2020 Millennial Home Buyer Report.
Means of communication: Another real estate trend that we are seeing with Millenials is the way of communication. As it turns out, most Millenials text to show interest in a certain property, to ask additional questions and to book the appointments. Phone calling is mostly reserved for urgent matters.
According to the above mentioned NAR research, agents are embracing the demand for electronic communication: 90% of agents communicate via text, 94% use emails, and 36% chat with clients via instant messaging.
Millennials’ goals: Millenials are eager to have a home of their own, which is why they don’t want to buy second-handed homes and deal with bad plumbing or old furniture. They want to have a turnkey house designed for them.
How to keep up with Millennials
If you are planning to build a real estate website or some other proptech product, there are 3 core ways to attract the biggest buying group of the real estate market:
Distinguish popular features
Besides having the necessary features, your product needs to have features that are currently in demand. This way you’ll be able to keep customers longer on your platform. The whole impression of your company will be more positive, which will be needless to say with all the closed deals.
Here are the most appreciated features for a real estate website, according to the NAR 2019 report:
Improve your online listings
Listings matter. It is basically the buyers’ first impression of their possible future home, which is why it should be perfect.
In order to provide the best customer experience, work on the mobile version of your website, upload only high-quality photos, and allow your customers to see the house inside out by using virtual tours.
Emphasize benefits, not the size
Everyone who has ever bought or rented a property knows how some customers become obsessed with the property size. The right decision for your website will be focusing all of the customers’ attention on the perks of a particular house and its location.
Recent studies have shown that Millennials care more about the neighborhood they will be living in, not the size of their home.
2. New Business Models in the Real Estate Industry
In addition, for keeping up with the new and forward-minded generation, real estate tech companies are creating more and more ways and models to satisfy their customers.
Amazon and the largest residential real estate brokerage company Realogy have teamed up to create the Turnkey solution for home buyers. TurnKey is a buying program of Amazon and Realogy.
By connecting a customer with a real estate agent, Turnkey enables a customer to have a voice in a matter of buying. Moreover, after purchasing a house Amazon helps to turn it into a home by providing free services. For instance, installing a TV and free smart products, all according to the sum a customer spent on the house.
Marketplaces are becoming the ‘it’ of the real estate industry
More and more marketplaces are invading the real estate market by introducing a new business model: a platform that is a middleman between buyers and sellers.
Marketplaces are disruptors for many incumbents: Airbnb threatens hotels, WeWork threatens office management companies.
However, real estate marketplaces create a new segment in the real estate industry. Many of these marketplaces fall into the sharing economy – the services they offer are shareable with others.
With Airbnb, you can rent a room in a house where others live, with WeWork you share a working space with others. Meanwhile, with CasaOne you can rent furniture for a certain period of time and with Zeus, customers can rent furnished homes while they go on business trips.
Examples: Zeus, AirBnB, WeWork.
3. Global Digitalization of the Real Estate Industry
According to the Real Estate Innovations Overview, digital real estate has spread all around the globe.
There are around 25 countries that are embracing Proptech real estate. The most innovative country in real estate digitalizing is the Netherlands, in second place is the UK and France. Then goes Australia and the last among the big runners are the USA and India.
PropTech is taking over the real estate market
PropTech (Property Technology) is the use of information technology to assist people and companies in researching, selling, buying or managing real estate. With proptech, real estate tech companies seek to add value to their business through technologies.
Alex Edds, director of innovation, at JLL UK says “On the face of it, proptech is the digitalization of real estate, but beneath the surface, there is so much more to it than that.
At its core, proptech addresses fundamental questions of how we experience and extract value from real estate.”
According to Emerging Trends in Real Estate Europe 2020, almost two-thirds of survey respondents have expanded the use of technology in their real estate businesses in 2019.
Approximately 90% implies that the use of technologies for real estate companies will go on trending upwards over the next five years.
The survey reveals two main ways of channeling technology – a third of respondents are buying products from third-party suppliers, while a quarter is investing or partnering with real estate tech startups.
It has been determined that the most difficult step in the home buying process is finding the right property.
In order to make this step easier, buyers are using the Internet, and as the survey reveals, most purchased homes were found online.
Here are the most popular real estate technology trends for 2020:
Buying and selling websites
The first and foremost popular way of digitizing a real estate business would be taking it online.
The studies show that the first source that customers use in home searching is online websites.
Besides using the web, the National Association of Realtors is also using mobile devices for a number of different activities, including communication with their clients.
Leading real estate websites can offer much more than a single agent is able to – with the below-mentioned web services customers can find both residential and commercial properties for sale and rent, either domestic or overseas.
Examples: Zoopla, RightMove, Realtor
Real estate management software
Management software makes it easier for property owners to manage their real estate and customers online.
Users need to have a lot of features in such management software. Namely, reporting, accounting, planning tenant screening (in case of rental software), automatic monitoring of insurance policy, and other vital functions.
Real estate management software saves money by utilizing the cognitive functions of an efficient computer program for management instead of a human or humans.
Examples: Appfolio, Rentec Direct, TennantCloud, Yardi.
Discover more on: How to Create a Proper Property Management System
High-quality photos and 360° videos are not going to be not enough for cutting-edge Millennials.
The Young generation is accustomed to the conveniences of the modern world and that’s why they won’t be using outdated features, they will use only up-to-date features.
A 3D virtual tour is a great millennial-like feature for letting customers explore the property while being at home.
The technology real estate trend of using virtual reality is not a newsflash.
Zillow, an online real estate tech company, has been using this feature for years, however, 2020 is likely to become the year where VR and AR will enter a mass market of real estate since it has become so much more popular lately.
What’s interesting is that the first action that users do while searching for a home is virtual tours.
In order for customers to have an ability to view home tours, Zillow, for example, lets real estate agents capture the imagery of the property by using an iPhone or Ricoh’s 360-degree cameras like the Theta V and Theta Z1.
Customers, on the other hand, can see arrows that let them click or tap around to different rooms, very similar to Google Maps View.
Examples: Zillow, Sothebysrealty.
AI, ML, and Property Value Estimation
Statistical models, machine learning, and big data are used to evaluate property value.
ML algorithms are a great way to predict how much your business will get in commission after every closed deal. Pattern recognition that is used in ML helps to define, for example, when a house or any other property will become popular. All in all, these algorithms lead to better real estate deals.
Zillow has created a product called “Zestimate” that, with the help of ML, estimates home prices based on publicly available data.
Real Estate CRM Software
CRM software helps manage the real estate business. Namely, real estate CRMs helps to track emails and leads, manage contracts, and keep tabs on the progress made with possible leads.
The commercial real estate technology trend of using CRM for real estate websites isn’t new. Nevertheless, it is expected to take a step further in the real estate industry and become more common in the real estate market.
The predictions about how blockchain can change and revolutionize the industry are huge. 2020 is envisioned to finally adopt blockchain to bring security, clarity, and efficiency to real estate transactions. There are two ways in which blockchain would help the real estate industry:
Tokenization is the usage of cryptocurrency for dividing assets into tokens that will be stored on the blockchain. In real estate tokenization changes a lot for different participants.
For example, it enables customers from different locations and using different income to be a part of the investment process. Moreover, property owners can sell just a chunk of their property.
- Smart contracting
These types of contracts are agreements that bring transactions between buyers and sellers together. Smart contracts speed up the process of verification, search for homes, and the process of acquiring a property.
Imbrex plans to launch smart contract-enabled transactions using its own cryptocurrency.
Real estate websites try to personalize the customers’ experience by suggesting properties based on previous choices. Big data will play an important part in real estate in the future. It allows the software to recommend more intelligent and personal searches.
Redfin, for example, uses the entire Amazon Web Services big data stack.
Examples: Trulia, Zillow, Redfin.
Starting in 2019, all the websites need to be mobile-optimized since Google announced that it will be indexing and evaluating the mobile version of your website first.
However, you should always evaluate your target audience and only then choose what exactly to build: a website or a mobile app.
In past years, besides having websites, a number of real estate companies launched their own mobile apps.
Examples: Zillow, Redfin, Trulia.
Real Estate Crowdfunding Platforms
Real estate crowding platforms allow customers to fundraise small amounts of capital from multiple individuals. These platforms allow people to become investors and customers. And, on the other hand, they can raise money from a number of investors.
Examples: RealtyMogul, Fundrise, CrowdStreet, Realcrowd.
To recap, there are 3 main real estate market trends that will be happening in the real estate industry in 2020.
1. Millennials will become the major property buying group in 2020
2. The new business model will continue to emerge in the real estate industry in 2020
3. Proptech (digital real estate) will continue to be enhanced in 2020
The first trend with the millennial generation will fuel the development of the second trend. Many experts say that without proper technological changes in the real estate industry, many companies who are brick-mortar will struggle to exist.
The technology trends in real estate that will prevail in 2020 are:
1. buying and selling websites
2. virtual reality, AI, ML
3. integration of property value estimations
4. real estate CRM software
5. Blockchain, Big Data, Internet of Things
6. real estate crowdfunding platforms
7. mobile apps.