One of the hottest and fastest-growing sectors for startup investing is Property Technology (or PropTech). According to the Wall Street Journal, halfway through 2019 more than $12.9 billion of investment has poured into this sector globally, more than the total investment of $12.7 billion in 2017.
But, what exactly is PropTech?
PropTech uses technologies to optimize and modernize tedious processes of searching, transacting, and managing properties for tenants, landlords, brokers, buyers, and sellers in the real estate industry.
The University of Oxford categorizes Proptech into three verticals of PropTech:
- Smart Real Estate Platform supports the monitoring, operations, and management of real estate assets;
- The Sharing Real Estate Platform facilitates the renting or sharing of real estate assets, such as offices and apartments;
- Real Estate FinTech Application simplifies the buying and selling process of real estate assets.
PropTech has been developing and evolving since 2000. The evolution of PropTech is demonstrated in Figure 1.
PropTech in Southeast Asia
The size of the Proptech market in Southeast Asia is still relatively small compared to China and India. According to JLL, there are approximately 800 Southeast Asian PropTech startups, with a total investment of $738 million over 36 deals in 2018. These figures are expected to increase due to several reasons:
- Rising middle-class population and salaries;
- Growing urbanization and younger population;
- Exponential growth of smartphone penetration.
Among the countries in Southeast Asia, Singapore emerges as the regional leader in PropTech investment as the government has a Smart Nation Initiatives to streamline transaction processes in the real estate industry under transformation roadmap, which is further supported by a mature startup ecosystem.
Nevertheless, there are several hurdles for PropTech industry, including:
- Restricted access to credit and financing and high financial costs;
- Outdated regulations;
- Trust and information asymmetry;
- Low purchasing power of the millennials.
Despite the hurdles, the outlook for PropTech in Southeast Asia remains positive. Government initiatives and investments from VCs are key to fueling PropTech development in Southeast Asia.
Author: Wanwares Boonkong
Editors: Nattariya Wittayatanaseth, Krongkamol Deleon
Cover photo by Jakob Owens on Unsplash