The Real Estate Technology Market Is Set to Continue Expanding
The #1 reason why you should consider investing in any particular industry is its growth potential. Real estate tech is offering great potential at this moment. Proptech is expected to grow from $9.73 billion in 2021 to $18.66 billion in 2028, with a CAGR of 9.7%. The global real estate market is also forecasted to reach a size of $5.85 trillion by 2031, up from $3.81 trillion in 2021. These numbers alone should be enough to convince skeptics of technology’s potential to disrupt the still relatively traditional real estate industry.
Although real estate is notoriously conventional and thus difficult to change, none of us can ignore the degree of transformation that digitization and technology has already brought in recent years. The path was first paved by companies like Airbnb and Zillow that started as small real estate startups and evolved into giants at the forefront of the digital disruption of real estate.
However, these giants aren’t the only ones transforming real estate through technology. There are literally thousands of PropTech startups working on important breakthroughs. For example, Beycome is a digital brokerage empowering home buyers and sellers to save thousands of dollars on commissions while offering a much better experience.
This is just one of many examples of real estate tech startups that are changing the game. Importantly, while real estate professionals tend to be conservative when it comes to technology, the last decade’s advancements have successfully shown them the potential value of proptech. In the current difficult economic environment, PropTech can drive efficiency and improve the bottom line. For example, Tour24 is a tool that allows property managers to dramatically increase the productivity of their leasing team by enabling self-guided tours.
We are confident that real estate technology will continue to see increasing demand in the coming years. Therefore, savvy investors should consider allocating some of their investment dollars to technology-driven real estate startups to capture some of this growth in the market, as the returns should be significant.
The Real Estate Market Remains Tough
Since the onset of the pandemic, times have been crazy for the real estate market—both residential and commercial. Between January 2020 and October 2022, the median price of a US home increased by 43%, compared to an average annual residential real estate appreciation rate of 4.1% since 1991.
In 2022, skyrocketing mortgage rates added further pressure on already anxious homebuyers, agents, and real estate investors. The 30-year fixed-mortgage interest rate reached its highest levels since 2002.
Overall real estate trends for 2023 point toward the beginning of normalization in the housing market. The early signs of this are already visible today. Nevertheless, the real estate market will remain tough in the coming months and years. Even if the steep spikes in prices and interest rates come to an end, experts agree that they will not take a dive any time soon and will stay significantly higher than what we saw over the last few years.
This reality creates a positive environment for technology-based real estate startups. In such a tough market, all stakeholders (homeowners, property investors, agents, and brokers) will need extra support and technology offers exactly that.
While we have witnessed a boom in numerous real estate startups in recent years, there is still a lot of untapped potential. Homebuyers can benefit from more apps that support financing amid high mortgage rates. Meanwhile, investors are on the lookout for further fractional investing opportunities and enhanced ways to analyze investments. Agents could also use more automation and streamlining of their day-to-day operations.
Investing in a real estate startup is a viable opportunity for 2023 and beyond. However, just because real estate and technology are set to continue growing doesn’t mean that any tech-based proptech company can successfully disrupt the space and bring profit to investors. As with any other investment strategy, it’s important to look out for certain indicators when investing in a startup. Specifically, pay attention to the startup team, the viability and scalability of the product, the size of the niche market, the exit strategy, and how your capital will be used.
