The coming AI reckoning should not frighten proptech, it should help focus it

Thought leadership by Andrew Stanton CEO Proptech-PR

‘The warning signs are becoming increasingly difficult to ignore. The Times has highlighted growing concern that the extraordinary boom in artificial intelligence is beginning to resemble the dotcom bubble, with investors increasingly concentrated in a relatively small number of technology companies and vast sums being committed to an industry whose future returns remain uncertain. The comparison should matter to proptech because property technology has enthusiastically embraced the AI narrative. The question is not whether AI will transform property – it almost certainly will – but what happens to the hundreds of companies whose valuations, funding and commercial propositions have become dependent upon it.

A correction in AI markets would not necessarily mean the end of AI. Quite the opposite. The dotcom crash did not kill the internet. It killed the assumption that every company associated with the internet was automatically valuable. Amazon survived. Google emerged stronger. Thousands of other businesses disappeared. The same distinction is likely to emerge in AI. The technology will continue to develop, but investors will become considerably more demanding about which businesses are actually creating value.

That could produce a particularly interesting shake-out in proptech.

Over the past few years, it has become remarkably easy for an established property software company to reposition itself as an “AI platform”. Add a large language model, introduce an AI assistant, automate a few workflows and suddenly an established product can be presented as something fundamentally new. At the same time, a new generation of AI-native proptech businesses has emerged promising to automate valuation, property descriptions, lead generation, customer service, compliance, sales progression and almost every other repetitive activity within the property transaction.

The problem is that an AI demonstration is not necessarily a business.

If capital becomes more expensive and investors become less willing to finance future promises, proptech companies will increasingly have to demonstrate something much less fashionable: revenue, margins, retention and measurable customer value. The question from investors and property companies will move from “How much AI are you using?” to “What does your technology actually do for my business?”

That is a healthy question. It could also expose a significant weakness in parts of the proptech market. Some companies have built propositions around access to AI models rather than proprietary data, distribution, workflow integration or genuinely differentiated technology. If the underlying AI capability is available to everyone, it becomes difficult to defend a business simply because it has incorporated AI into its product.

The winners are therefore unlikely to be those with the loudest AI messaging. They will be the companies that have embedded AI into a difficult-to-replicate property workflow. This distinction matters enormously. A property company does not ultimately want artificial intelligence. It wants more instructions, faster transactions, better valuations, lower operating costs, fewer errors or happier customers. AI is simply the mechanism for achieving those outcomes.

There is another potential consequence. A financial correction could actually accelerate consolidation across proptech.

During an era of cheap money, investors can afford to support multiple competing businesses pursuing essentially the same opportunity. When capital becomes scarce, that changes. Companies that might previously have raised another round may instead become acquisition targets. Competitors merge. Larger property technology companies acquire AI capabilities rather than building them themselves. Others simply disappear.

That could be particularly significant for the established proptech companies currently facing pressure from AI-native challengers. For years, the assumption has been that incumbent property technology businesses are vulnerable because their technology was designed before AI. But an AI correction could create the opposite dynamic. Companies with substantial customer bases, recurring revenues and established relationships with estate agents, portals, lenders and conveyancers may suddenly become highly attractive acquisition platforms.

The irony is that the companies which look least exciting during an AI boom may prove the most resilient during an AI downturn. The Bank of England is already highlighting vulnerabilities around elevated valuations, leverage and concentration in AI-related companies, while warning that rapid advances in AI also create operational and cyber risks. That does not mean a crash is inevitable. But it does suggest that businesses built around technology should be thinking about resilience rather than assuming that capital will remain plentiful.

For proptech, this means the next phase of the AI revolution could be considerably less glamorous. The first phase was about experimentation. The second was about funding. The third may be about proving the economics. That could be good news. A mature proptech market should not reward companies simply for attaching AI to their pitch deck. It should reward companies that can demonstrate that technology changes the economics of property.

And there is an important distinction between those two things. If an AI model enables an estate agent to handle twice as many enquiries without doubling its headcount, that is valuable. If it reduces the time required to bring a property to market, that is valuable. If it identifies a buyer who is genuinely more likely to transact, that is valuable. If it reduces failed transactions, improves mortgage conversion or gives a property owner better information about the asset they own, that is valuable.

But if the principal achievement is simply that a company can generate a convincing property description in three seconds, the market may eventually decide that the feature is not worth the valuation. The coming AI reckoning, therefore, should not frighten proptech. It should focus it.

The winners will be the companies that survive without perpetual fundraising, own something genuinely difficult to replicate and solve an expensive problem for customers. AI will remain enormously important, but it will increasingly become infrastructure rather than the product itself.

The dotcom crash ultimately separated the internet from the companies that merely happened to be using it. The next correction could do exactly the same thing to AI. And proptech should be ready for that distinction.’