Proptech – a paradigm shift for Korea’s real estate market
Proptech, a compound of “property” and “technology”, referring to the integration of IT technologies into real estate has been creating
Proptech, a compound of “property” and “technology”, referring to the integration of IT technologies into real estate has been creating a buzz to be the next big wave in shaping the future real estate. Korea’s proptech sector is powering through, ushering in diverse applications – some already adopted by consumers and even businesses including online listings, virtual tours, smart buildings to name a few.
The leading category in Korea’s proptech scene is online listings that is spearheaded by two companies – Zigbang and Dabang. These online platforms allow individuals to search and select candidate apartments and perform comparison shopping with photos showing interiors and structures while successfully undercutting brokerage fee. However, their strengths are not just built around the above, rather it is centered around big data on real estate transactions gathered from over 20 million users that helps to provide in-depth analysis on properties and locations.
Similarly, virtual and augmented reality technologies also have a promising future for potential application. Urban Base, a company offering advanced technology, can transform 2D architectural drawings into 3D physical images within seconds. The company has accumulated a database of 6.2 million 3D drawing, amounting to 70% of total apartment housing stock in Korea. Users are now able to simulate home furnishing and interior designs ahead of time.
Real estate driven P2P financing firms is another booming area that is driving the lending platform embedded with fintech. It connects individual lenders to small sized developers in commercial real estate. The frontrunner in this area, is Tera Funding that is reported to have underwritten KRW 500 billion in real estate loans while reporting no default. Even though the AI and big data front has been the most sluggish category so far, forward thinking entrepreneurs have started to roll out several eye-catching apps such as Hogaengnono. The app recommends users an optimal apartment for potential house purchase by analyzing diverse real estate market data while factoring in personal preference. Gipfund will then help potential owners to get instant appraisal with a few data input.
Despite these intriguing developments, we note a few challenges that lie ahead. Many applications we see in the marketplace tend to be skewed toward serving individual consumer needs, offering little application on the B2B front. Additionally, while government funding for the start-up industry continues to hit record highs, monetary resource for proptech seems to be limited.
However, Korea’s proptech future looks bright down the line with growing government initiative and a thriving ICT environment. Government sponsored entities such as Korea Appraisal Board are announcing initiatives to eliminate the asymmetry of information by offering better accessibility to real estate data through integration onto a single platform which would lead to opportunities for AI, big data, fintech based proptech. Korea was ranked first in ICT penetration rate in World Economic Forum’s global competitiveness rankings in 2018, representing more advanced IT and internet infrastructure than other countries which could translate into faster adoption and utilization of various proptech applications going forward.