What is real estate tech?

Real estate tech is a coined word that combines “real estate” and “technology”, and is written as Property technology in English.

The meaning of the word includes not only the use of technology to solve problems in the real estate industry such as inefficiency and information opacity due to delays in digitalization, but also the movement to create new real estate value.

Real estate tech, which has been a hot topic in the United States since around 2014, is currently attracting attention in Japan, coupled with the trend of promoting DX (digital transformation) . In this article, we will explain the background of the expansion of real estate tech, changes in market size, relevance to the latest technologies such as AI and VR, and examples of use by category .

What is real estate tech? Introduce definitions and business models

First, explain the definition of real estate tech

In the real estate industry, where traditional business practices remain deeply rooted , delays in digitization and information opacity have been viewed as problems. “Real estate tech” is a system that tries to solve it with technology . First of all, I will introduce the definition and the representative business model of real estate tech.

Definition of real estate tech

Real estate tech is a coined word that combines “real estate” and “technology” . It is sometimes called “re-tech” by combining “real estate” and “prop-tech” by combining with “property”.

The Real Estate Tech Association defines real estate tech as follows.

In addition to improving the efficiency of brokerage and management operations, the term real estate tech includes the creation of new customer experiences, revenue models, and platforms. Therefore, it can be a big change not only for those involved in the real estate industry, but also for consumers.

Real estate tech business model

There are many different business models for real estate tech. In addition to management and brokerage support services , AI-based price visualization and matching promotion, information transparency using blockchain, simulated previews in VR, realization of smart homes using IoT, real estate crowdfunding , and Space sharing is also included in real estate tech.

It is characterized by its involvement with various industries other than the real estate industry, and is closely related to technologies in other industries such as fintech, construction tech, and the sharing economy.

Challenges faced by the Japanese real estate industry

Approaching four issues of the Japanese real estate industry

Before explaining real estate tech, I will first introduce the issues facing the Japanese real estate industry. There are a wide range of issues, such as laws and regulations, industry-specific rules, and movements with an eye on the next generation.

Challenge (1) Delay in digitization

The biggest obstacle to the digitalization of the real estate industry is the Building Lots and Buildings Transaction Business Act , which stipulates real estate transactions . Article 35 stipulates that the real estate transaction chief must explain important matters verbally and in writing after showing the chief’s certificate. Inefficiencies are becoming apparent.

Therefore, in 2017, the Ministry of Land, Infrastructure, Transport and Tourism started the operation of “IT heavy theory” that enables non-face-to-face explanations, and in 2019, conducted a social experiment for the spread of electronic signature services. However, the current situation is that digitization is progressing slowly .

According to NTT Data Institute of Management Research’s ” 2nd Trend Survey of Real Estate Tech Initiatives in Companies ,” the awareness of real estate tech itself is 3.9%. In addition, about 70% of real estate-related companies feel a sense of crisis about new trends such as real estate tech.

There are many stakeholders in the real estate industry, including investors, tenants, builders, and developers. The complex industry structure is also a factor that hinders digitization.

Issue 2: Transparency of information

Asymmetry of information has long been a problem in the real estate industry . This refers to the state in which either the seller or the buyer has a lot of information about the products and services traded in the market, but in the real estate industry, the information tends to be biased towards the broker. Therefore, it is said that there are many cases that work against real estate owners who are thinking about selling and consumers who are thinking about buying.

One of the factors behind this is the existence of the real estate information network system ” Rains ,” which allows real estate brokers to search for properties nationwide and check the transaction status .

The purpose of REINS is to dispel consumer anxiety about real estate transactions and revitalize the market. However, basically only real estate agents can use it, and consumers cannot independently know information such as price market , creating information asymmetry.

In addition, due to the nature of the system, which allows you to search for the same property anywhere in the country, it becomes difficult to differentiate brokers, and “decoy advertisements” are sometimes posted to attract consumers. The circulation of real estate information that cannot actually be contracted leads to the disadvantage of consumers.

Challenge ③ Deficiency of the database

According to the 2018 Housing and Land Statistics Survey conducted by the Ministry of Internal Affairs and Communications, the number of vacant houses in Japan is about 8.49 million, and the vacant house rate is 13.6%, a record high. Currently, the increase in vacant houses has become one of the social problems.

In 2018, as a solution, the Ministry of Land, Infrastructure, Transport and Tourism certified second-hand properties that met certain standards such as earthquake resistance as “Anshin R Housing” and implemented measures to promote distribution and utilization by wiping out the negative image. However, in the current system, data such as real estate transaction history, maintenance and management status, renovation history, contract price, etc. are not aggregated, which is considered to be one of the factors that hinder the distribution of second-hand properties .

The Ministry of Land, Infrastructure, Transport and Tourism has introduced a transaction status registration system for REINS in order to promote the facilitation and optimization of used property brokerage. Since a public ID is given when a property is registered, it has become a system that makes it easy to aggregate data on the same property. Through these measures, it is expected that a comprehensive database will be constructed in the future.

Challenge ④ Providing new value

In the past, there was a tendency to demand hard aspects of real estate, such as architecture and facilities, but today, the emphasis is on soft aspects such as services and the new value created by real estate .

WeWork, a start-up company from New York that develops a shared office business, offers not only software aspects such as high-speed internet and drink bars, but also new ways of working using coworking spaces and building networks between users. , contributed to the spread of new value in real estate.

In February 2019, Mitsubishi Estate’s DX Promotion Office conducted a demonstration experiment of an “on-demand commuter shuttle” together with “MONET Technologies”, a joint venture between SoftBank and Toyota Motor Corporation. Marunouchi, where the Mitsubishi Estate building is located, and 6 areas, including Toyosu and Kichijoji, are connected by a minivan, and services such as Wi-Fi and light meals are provided on board. We consider not only the time spent in the office but also the travel time to the office to be the value of real estate, and we are exploring new possibilities.

In this way, it can be said that the creation of new value that transforms people’s lives itself, as well as the efficiency of existing operations and the transparency of information, is important for the realization of DX using real estate tech.

Real estate tech trends and market size

A review of trends in real estate tech

Reform using technology is necessary to solve the problems of the Japanese real estate industry. Here, we will review the trends in real estate tech and explain the market size and potential of real estate tech in Japan.

Pioneers are American venture companies

Real estate tech began to attract attention in the 2010s. In 2014, the cumulative amount of funding raised by real estate tech-related venture companies exceeded $1 billion for the first time in the United States.

In 2016, the valuation of Compass , a venture company that operates a second-hand property trading platform , exceeded $1 billion, making it the first unicorn company in the real estate tech industry. The company is working on real estate tech from various aspects, such as business management support by technology, price visualization, and transparency of real estate information.

Following Compass, “Opendoor” provides online real estate trading services, “Zillow” develops real estate matching services, and “Redfin” operates real estate information sites and brokerage services. ” also grew into a large company. The four companies are called ” ZORC ” after GAFA (Google, Apple, Facebook, Amazon) .

Real estate tech became a hot topic in China

“ Homelink ” is the driving force behind real estate tech in the Chinese market . We are a venture company that provides not only new, used, and rental properties, but also resort real estate and overseas real estate matching services. Armed with over 8,000 physical stores and an information site with more than 70 million properties, the company quickly grew into one of China’s largest brokers. In 2016, we joined the ranks of unicorn companies.

The rise of Homelink is an important turning point as it shows that real estate tech is not just an American trend, but a global phenomenon.

In 2019, Mitsubishi Estate invested 100 million yen in Singapore’s real estate tech company “GorillaSpace”. Japanese companies have also embarked on the Asian real estate tech boom.

Japanese real estate tech market size

In response to the trend of overseas real estate tech, new businesses and services are being born one after another in Japan.

According to the 6th edition of the “Real Estate Tech Chaos Map” (created on June 15, 2020) created by the Real Estate Tech Association, there are 352 real estate tech-related businesses and services in Japan . It has grown rapidly since the first edition, which was created about three years ago with 80 articles.

Also, according to a report by Yano Research Institute, the real estate tech market, which was 381.8 billion yen in 2017, is expected to expand to 626.7 billion yen in 2020 .

The real estate industry is a huge market worth 40 trillion yen, maintains high profit margins compared to other industries, and has more business establishments than convenience stores. increase. In 2019, Japan’s first real estate tech-focused fund was established, and the market size and investment amount are expected to expand in the future.

The latest technology that supports real estate tech

What are the four technologies that expand the possibilities of real estate tech?

Real estate tech is expected to expand its market size in Japan. From here, we will introduce the latest technologies that support that growth.

AI: Market analysis, price visualization, matching promotion

If AI (artificial intelligence) analyzes big data such as property information that has been accumulated so far, the results can be effectively used in various applications.

In terms of market analysis and price visualization , AI predicts and calculates prices based on currently published property data . Property owners can know the selling price, and prospective purchasers can know the market price for buying, because information about the surroundings of the property, regional information, and in the case of condominiums, the number of floors and directions are indexed.

In addition, the use of AI-based recommendation functions and chatbots enables interactive property searches , realizing highly accurate matching.

IoT: Realization of smart homes and smart locks

IoT is a system that connects everything around us to the Internet. As IoT advances, it will be possible to remotely control lighting, air conditioners, and entrance keys, and it is believed that the convenience of real estate will improve .

“Smart locks” that unlock and lock with devices such as smartphones have already been introduced not only in homes and offices, but also in private lodging facilities. If the property you want to see has a smart lock installed, you can save the trouble of adjusting the schedule with the broker and handing over the key from the owner.

In addition, if security is strengthened through the use of IoT, it will lead to an increase in the value of real estate .

VR/AR: Pseudo preview, layout simulation

By utilizing VR, it will be possible to simulate a preview using a wearable device without having to visit the site. Even people who say, “I’m too busy to go to the interior viewing” or “I can only take time at night,” can do the interior viewing, which leads to the advantage of preventing loss of contract opportunities for brokers.

It is also possible to simulate the layout of your own furniture and household goods by reproducing the floor plan in 3D space using AR . By reducing the gap after moving in as much as possible, you can minimize anxiety before the contract and troubles after the contract.

Blockchain: Efficient information management and real estate transactions

Blockchain is a mechanism in which multiple computers on the Internet share records with each other and accumulate correct records by connecting them like a chain. It is characterized by the fact that it is difficult to tamper with records, and it is currently being used in various fields such as finance, food management, and medical care.

LIFULL, which operates a real estate portal site, has been paying attention to blockchain since 2017. We have created a database by assigning numbers to real estate, and have set the sights on low-cost and safe information management . From November 2019, we started a demonstration experiment of rights transfer records using blockchain. We are verifying the possibilities and challenges of blockchain utilization in real estate tech.

There are also expectations for a mechanism called ” smart contract ” that records contract information on the blockchain . This means that when the conditions agreed in advance are met, the contract will be automatically renewed without going through a third party such as an intermediary. Smart contracts are believed to contribute to the efficiency of real estate transactions.

■ The latest technology that supports real estate tech

Categories and Cases of Real Estate Tech

From here, we will list services and examples that are attracting attention according to the classification of the 6th edition of “Real Estate Tech Chaos Map”.

Real estate tech category ①: Management support

“Management support” is a service that streamlines all management operations of real estate agents . We mainly support the work called “property management”, such as soliciting vacancies, signing contracts, responding to tenant complaints, and collecting rent.

Neos, a system development company specializing in the real estate industry, provides management support services for cost reduction. The five types of targets are “new construction/sales,” “brokerage/leasing,” “purchase/resale/renovation,” “condominium management,” and “building maintenance.” We have a variety of management systems for different fields, such as customer management, contract management, key management, and sales management.

Real estate tech category ②: Brokerage support

“Brokerage business support” is a service that supports brokerage operations for real estate sales and rentals .

Launched in September 2019, “OHEYAGO” is a rental information site that allows you to complete a series of procedures from preview reservation to move-in application on your smartphone. It is managed by Itanji, a pioneer in real estate tech in the rental field, and is a subsidiary of the listed company GA technologies, which develops the real estate business.

OHEYAGO not only provides convenience for consumers, but also supports intermediary business efficiency. It eliminates the need for customer service at the storefront, accompanying viewings, and contacting the management company by phone or fax, thus significantly reducing intermediary costs.

Real Estate Tech Category ③: Property Information/Media

A new wave is also coming to real estate media and platforms.

In 2017, the information site “SUMAVE” specializing in real estate tech was opened. We post various contents such as the latest news about real estate tech, overseas cases, empirical data useful for business, and event reports where you can learn the knowledge of experts.

Real Estate Tech Category ④: Matching

“Matching” is a service that promotes matching of various cases, such as real estate owners and consumers, business and resources, and those who wish to close and those who wish to open a store .

The real estate portal site “Tenanta” is a matching service between tenants looking for store properties and real estate companies that own properties. By posting the conditions desired by tenants, the needs for store openings can be visualized, and it is a mechanism that leads to customer development for real estate companies.

Real estate tech category ⑤: IoT

Speaking of IoT-related news that has attracted attention in recent years, Amazon announced “Amazon Key.” With a dedicated smart key and cloud camera, it is a service that delivers packages to your home even when you are not at home.

The smart lock, which can be said to be the Japanese version of this Amazon Key, was developed by a venture company from Japan “Lineaf”. “NinjaLock”, which was announced in 2016, not only remotely opens and closes the lock, but also carries out identity verification of the visitor at the call center of Rainaf. You can receive packages even when you are not at home, and you can use housekeeping and home delivery cleaning services.

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Real estate tech category ⑥: VR/AR

This category includes not only services that utilize VR/AR devices, but also services such as data processing for VR/AR .

Nerve, which is said to be a pioneer of VR viewing, is working on VR viewing of newly built condominiums and rental properties, as well as VR home staging (a method of virtually coordinating CG furniture and accessories with indoor images). Home staging is not only a measure against vacancies because it allows you to guide the property before moving out, but it also creates benefits such as improving the rate of visits and closing rates by making the property look attractive.

Real Estate Tech Category 7: Space Sharing

“Space sharing” refers to a service that shares real estate and vacant spaces and performs matching.

Mitsui Fudosan entered the shared office business in 2017. In 2018, we will develop three services at 50 locations nationwide: multi-site shared office “SHARE”, serviced office “FLEX” that can be entered 24 hours a day, and workspace “STAY” where you can stay overnight. We are also promoting matching and collaboration among shared office members, and are pursuing new real estate value.

Real Estate Tech Category ⑧: Reform/Renovation

“Reform/renovation” refers to services that provide planning, design, and construction of remodeling and renovation, as well as matching with remodeling companies.

“Robe Real Estate” provides a one-stop solution for financial planning, real estate purchase, planning and design, renovation work, interior coordination, and after-sales service. The operator is “WAKUWAKU”, which develops the second-hand housing platform business, and announced in February 2020 that it will raise a total of 410 million yen.

Real Estate Tech Category ⑨: Price Visualization/Assessment

“Price visualization and appraisal” is a service that uses various data to analyze real estate prices, rent appraisals, future prospects, etc.

“Gate. Market Survey”, which enables market analysis with one click, is a report creation tool based on real estate big data of over 100 million properties. For each area, we calculate items such as rent distribution, number of rental properties, changes in rent over time, and future population forecasts to support real estate buying and selling decision-making.

Category 10 of Real Estate Tech: Crowdfunding

“Crowdfunding” is a service that collects funds from investors, mainly individuals, and invests in and lends to real estate . It also includes a service that invests in proponents aiming to start up a new real estate business.

The crowdfunding “Crowd Realty”, which started in 2017, supports the creation of new value for real estate in Japan and overseas. In addition to the project name, purpose, target amount, the drafter posts the expected operation period, expected yield, expected investment ratio, etc., and solicits investors. Real estate in Tokyo, Kyoto, Miyazaki, Estonia, etc. has been operated through crowdfunding.

Category 11 of real estate tech: Loans and guarantees

“Loans and guarantees” refers to services that provide, broker, and compare loans and guarantee services related to real estate acquisition .

The online mortgage service “Moge Check” is a simulator that calculates a mortgage based on information such as annual income. We provide loan availability determinations, mortgage recommendations, monthly payments, and a mortgage review service.

Real Estate Tech Category 12: Real Estate Information

“Real estate information” refers to services that provide and analyze data related to real estate, excluding property information .

“ceret” is a service for real estate agents that can centrally manage documents in different data formats, such as real estate registry copies, property summaries, rent tables, and repair costs. Just drop the PDF of the registered copy on the screen and it will be converted into data, which will also lead to operational efficiency.

Real Estate Tech Development Case of Monster Lab

Here, we will introduce a development example of Monstar Lab’s real estate tech-related services.

Condominium purchase consideration support service “Mansion Fit” / Haseko Corporation

Mansion Fit is a new service that supports customers in searching for new condominiums.

The biggest feature is that you can use the service simply by adding the official account to “friends” on LINE. By answering simple questions, you can check the recommended property information based on the purchaser data held by the Haseko Group, and you can also book a tour on the same LINE. You can visit the model room at your own pace, as there is no need for a sales representative to accompany you.

Monster Lab is in charge of everything from design areas such as UI design and LP production to product development. We continue to support the operation of the service.

Summary: Let’s correctly understand real estate tech and lead to DX promotion

Real estate industry with many business opportunities

Until now, the real estate industry has struggled with digitization for many years because of conventional practices, but on the other hand, it can also be considered an industry with room for growth with countless business opportunities .

At present, the focus is on using technology to improve the efficiency of management and brokerage operations, but in the future, there will be increasing expectations for the realization of DX through real estate businesses and services that completely overturn people’s sense of values. For that reason, it is important to understand the market needs after correctly understanding the trends and significance of real estate tech.