PROPTECH-X ‘Proptech & Property News’: Knight Frank Investment | Rightmove Report

KNIGHT FRANK INVESTS IN PROPTECH FUTURES VIA FIFTH WALL

Knight Frank, together with a cohort of other real estate luminaries, is putting cash into Fifth Wall’s coffers to invest in Proptech SMEs looking to put forth innovative solutions for the real estate sector. 

Fifth Wall, who is looking to expand its reach into Europe, along with Knight Frank and others, will be fronting the cash to ensure that they are at the front of the innovation and solutions that software will provide. 

Although Fifth Wall has only existed for about seven years, it already has nearly a hundred investors worldwide and a cohort of real estate players. Wallace & Greiwe, being the visionaries who saw that the property asset class was woefully behind and its analogue axis was ripe for change, have a large portfolio including Opendoor, ClassPass, etc.

The kicker though is that real estate or estate agency corporations are realising that it makes complete sense to be ‘investing’ in the digital hand tools that they will be utilising.

Many agents wrongly see property technology as the enemy. However, it is very much the here and now; strategic investment in great tech that will ultimately leverage your own business is a double win, as when companies exit for multi-millions or even billions, there are huge profits to be made.

With my daytime role running a consultancy for founders of property technology companies in the UK and further afield, as well as helping estate agents to digitally transform their agencies, it is great to see that even more investment is pouring into the sector and agencies are getting into the mix. 

A lot has been written about proptech, which is a very broad church covering all sectors that touch the property asset class, commercial real estate, residential, lease and lettings, the planning, build and asset management of property. 

If we were to take a small sub section of that, say just the residential estate agency industry in the UK, what agents need to realise is that with the fourth industrial revolution – technology – it is not agents who are replacing other agents by gaining market share advantage; it is agents with technology who are replacing the agents who have failed to embrace technology. 

For over thirty years I was very much an analogue estate agent, but if I conducted business in 2022, at a time when Amazon exists and has a market capitalisation of $1.7 trillion, I would understand that the consumer requires a digital play to suit their requirements.

Also, I would quickly realise that AI and big data are our friends, enabling agencies to automate the boring and laborious, allowing humans to do the soft skills, the human facing part of the businesses, as they have more time, deeper knowledge and have a greater value for their paying clients.

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RIGHTMOVE ANALYSIS SHOWS PROPERTY LISTING PRICES CONTINUE TO RISE & ACTIVITY IS HIGH

According to Rightmove’s monthly House Price Index report, the typical price of a home coming to market does so at a staggering value of £341,019, over 7% higher than a year ago. It is also the biggest jump in listing prices for the same period for seven years.

So, house price inflation seems to be mirroring the national trend of inflation that is hitting everyone in their pockets and everything is becoming more expensive.

There is also not let up for first time buyers either, as new inventory hitting the market is priced 1.4% higher at an average cost of £214,176 to get on the housing ladder. Rightmove states that demand has risen by 15% also during January, at a time where the amount of property for sale has been at historical low levels, with an average of only a dozen properties being on the books of the average agent. 

The analysis did show that the number of potential vendors looking for a market appraisal had risen by 44% in the period, but this trend has not yet translated into a surge of stock coming to market. 

Rightmove’s spokesperson Tim Bannister comments: “People who have made it their New Year’s resolution to move are finding asking prices are within just one per cent of the record from October last year, and are at the highest level ever recorded for first-time-buyer type homes. All of the signs suggest that prices are likely to continue to rise until more choice is available. Three regions are in most urgent need of new supply, the East Midlands, South West and South East of England, as they are now at unsustainable rates of annual price growth above 10%

”While the low number of available homes may appear daunting for buyers still looking to make 2022 their year to move, there are early signs of more property choice coming to market soon.”

From my point of view, 2022 may play out very differently to 2021, as some of the key levers are no longer in play. The removal of the SDLT giveaways by the chancellor are no longer available, which may in time dampen the market. 

The Bank of England has edged its interest rate up twice from 0.1% to 0.5% and other rises are expected, so the cost of moving will increase, coupled of course with domestic inflation now hitting 5.7%, and personal taxation allowances changing in April. 

There may well be momentum passing through from 2021, into the 2022 housing market, but as we have seen in previous boom to bust housing markets, market sentiment is susceptible to numerous factors, but what causes the housing market to slow is often huge asking prices which causes a Mexican standoff. Buyers want to buy, and vendors want to sell, but if the prices are unrealistic no-one transacts. 

Perhaps out of all of the intel from Rightmove’s analysis, if stock levels recover things may change, as at present it is definitely a vendor’s selling market. But that pendulum always swings the other way at some point.

The report states: “Competition among buyers for available homes also remains strong as we move into 2022, with 15% more enquiries from would-be buyers to estate agents than at the same time last year. With both more enquiries from buyers and fewer properties available, the overall level of buyer interest per available property is almost double what it was at the start of 2021, which was itself a very active market. As a result, more than 70% of the properties currently on estate agents’ books have already been sold, leaving less than 30% still available to buy.”