Proptech refers to industries or companies that utilize IT and digital technologies to provide various real estate services online (non-face-to-face). It started with providing real estate information and mediating real estate transactions via the internet or apps, but recently the scope has been expanding to include real estate appraisal, loans, and more. Global proptech investment has rapidly grown, increasing 40-fold over 10 years from $180 million (approximately 203 billion KRW) in 2011 to $7.2 billion (approximately 8.122 trillion KRW) last year.
The main reason behind this rapid growth is the onset of the IT and digital revolution. Traditionally, real estate was considered a low-tech industry with little connection to technology, but as IT and digital technologies have advanced beyond a certain point, it has become possible to better meet the needs of both demand and supply sides than analog methods. In particular, two core IT and digital technologies have influenced the rapid growth of proptech. One is real estate finance utilizing digital technology, exemplified by P2P (peer-to-peer) lending. The other is the development of spatial technologies such as 3D printing, augmented reality (AR), and virtual reality (VR). P2P enables easy provision of customized products, and advanced spatial technologies have made efficient sales, purchases, and building management possible.
Internationally, proptech began in the mid-2000s in the UK, but the US has shown rapid growth. In 2009, during President Barack Obama's administration, real estate public data was fully opened, and more than half of global proptech investments are made in the US. In Asia, Singapore ranks 11th and Hong Kong 15th, leading the way. Korea is in the 40th rank but proptech has been increasingly activated recently.
Proptech can be particularly well utilized in real estate value appraisal. For example, in the real estate industry, there is a saying that "you only know if real estate is a bubble after it passes," meaning that due to a lack of data, proper value appraisal is not possible. However, by digitally building various data in real time through proptech, increasingly efficient value appraisals can be achieved. This can provide an opportunity to eliminate the chronic problem of information asymmetry in the real estate market.
Another important implication of proptech is that the real estate industry is becoming platformized like the financial industry. Real estate demanders, suppliers, and brokers exchange information on sales, rentals, and value appraisals on platforms, with Zillow in the US and Goodlord in the UK being representative examples. Zillow, for instance, has information on 103 million households, corresponding to 97% of all US homes. In Korea, platform companies such as Naver Real Estate and Zigbang are also growing.
The use of blockchain technology is also a key factor in the growth of proptech. Real estate accounts for 70-80% of personal assets and is large in scale. Since proptech involves exchanging information and conducting transactions digitally and non-face-to-face, errors in information or transactions can cause serious problems. Therefore, preventing forgery and tampering is crucial, and blockchain is a representative means to prevent such tampering. Experts evaluate that blockchain will be a core element in the growth of proptech.
For example, if real estate registration is done via blockchain to guarantee no tampering, digital real estate transactions become more convenient. Digitalization is a global mega trend, and since the real estate market is still inefficient due to information asymmetry, the growth potential of proptech is rather large. The era is coming when the millennial generation, born alongside the internet and digital technologies, will be the main home buyers. The growth of the proptech market is expected to accelerate further.
Jung Yushin, Dean of the Graduate School of Technology Management at Sogang University and Director of the Fintech Support Center
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