Future focused
While property is a tangible asset, property technology – or proptech – is taking property transactions and management online in new and exciting ways.
Nondumiso Ncapai
Head: Product at Absa Home Loans
Communities of the future
As the world changes, so too will its communities. Nondumiso Ncapai, Head: Product at Absa Home Loans, says that home ownership, however, will continue to be an important aspect that many will strive for as it gives a sense of dignity, belonging, achievement and legacy.
“We still sit with significant housing issues globally. The US alone still grapples with affordable housing stock,” she says. “This is nothing new in the South African context, where, with a population of 57.7 million in South Africa by December 2018 we had 16.6 million households with only 6.6 million registered formal properties, meaning that 10 million households still live in rented or on tribunal land or in informal settlements.”
Ncapai believes the continued development of mega city projects will play a pivotal role in addressing the needs of homeownership. “In Gauteng alone we know that current and planned megacity projects will yield over 50 571 units aimed at addressing the need for affordable housing in the area,” she says.
She explains that mega cities entail the redevelopment of existing cities and leveraging of new areas, which will also involve investment in new infrastructure. Another trend she believes will play a vital role is innovative building technologies, which will reduce the cost of housing and support sustainable living. “There is a growing need for governments, businesses and civil society to support the United Nations Sustainable Development Goals, with a call for businesses to apply their creativity and innovation to solve for sustainable development challenges to ensure a sustainable future,” she says. “This will mean increased use of water saving and alternative energy solutions.”
André Holtshausen, CEO, PayProp United Kingdom, brings a different nuance, particularly in youth segment, saying, “Among the younger generation, property ownership is still not a high priority. The flexibility to move around easily and quickly means that property rental and full-service rentals in particular will become important. Because work is moving online for many and an increasing number of businesses are embracing a distributed work model, housing needs have changed – people are willing to leave cities and move to bigger properties further out with enough room for work-from-home stations. Where large developments are taking place, full community development, including all amenities, are becoming the norm. We’ve seen this in South Africa and abroad.”
“Like restaurants needed to meet consumer demand for app-based delivery and interaction, so the property industry will need to adapt to new consumer trends. Most services and products are accessed via an app, and the property industry is meeting its customers this way, more and more,” he says. “The industry also needs to think about space and how it is offered more creatively. Space-as-a-service is a key trend, from co-working to co-living.”
Sean Godoy, founder and director of Divercity Property Solutions and co-founder of SA Proptech and Proptech Africa, is upbeat about communities of the future, hoping that they will be more integrated and “inclusive to address inequality and spatial segregation of income groups”, and that they’ll definitely be more tech-savvy. He underscores that more affordable housing is needed near economic opportunities.
PayProp is an automated payment and reconciliation platform specific to the residential rental industry. CEO, PayProp in North America, Louw Liebenberg, says that in the US, there has been a strong move towards the corporatisation of single-family letting. “Large corporations and pension funds continue to buy up smaller investment portfolios from private investors and manage them in large consolidated funds. More investors are also building dedicated rental-only properties and using the infrastructure to create a fuller tenant experience,” he says.
Proptech: how South Africa compares
Absa’s head of CPF business development and research Kgopotso Mathole says that although digital adoption is speeding up, e-commerce penetration is still relatively low locally. Drawing from Euromonitor International research, Mathole says online retail in SA grew from R17.5bn in 2019 to R27.4bn in 2020, but “this still represents only 2.6% of nominal retail trade sales”.
“This level of penetration is still low when compared to developed markets such as the United Kingdom, Germany and the United States. In these countries, online retail is at double digit levels of 26%, 20% and 14%, respectively.”
Holtshausen adds that in South Africa, the EAAB is the central regulator for the property industry. “In the UK, by contrast, there is no central regulator, although there are a number of industry associations requiring adherence to professional codes of conduct and client money standards for membership,” he says. “The industry is not very regulated, but rental (or letting) agencies are still expected to comply with numerous laws and regulations that affect how they operate. This increases risk for these businesses and it is easy to fall foul of the law. However, like client money protection, tenant deposits are highly regulated within government-approved schemes. In the US, Canada and the UK, there are also differences in regulation between states (US), provinces (Canada) and countries (UK), which further complicates the property market.”
“I think it is worth noting that, despite the uncertainty and hardships brought on by the global pandemic, results from PayProp’s 2020 State of the Rental Industry survey showed that 78% of respondents are optimistic about the future of the rental industry – higher than the pre-pandemic results,” says Johette Smuts, Head of Data Analytics, PayProp South Africa. “To me it shows that the industry embraces change and is remarkably resilient.”
Shaking up the market
Currently, Godoy says, much of the proptech focus is on the transactional space, first in residential, and now in commercial property too. “This applies to both sales and lettings, and some interesting examples include LeadHome, PropertyFox, Gmaven, The SA Property Exchange and Instant Property,” he says.
He adds that crowdfunding for both investment and fundraising is another important development, especially in terms of providing access to investment and wealth creation for previously excluded demographics, as well as alternative funding options for entrepreneurs and larger investors/developers alike.
There is also innovation happening in property management. Godoy says some platforms are harnessing smart building tech, and there are also exciting projects in digital title deeds, harnessing blockchain tech or similar platforms. “These have a great potential in South Africa and other emerging markets to help issue title deeds and ensure transparency and secure tenure,” he says.
Liebenberg says that in the US, there’s a lot of proptech innovation around e-buyers and home trade-ins. Holtshausen adds that in the UK, there’s particularly fierce competition in the customer resource management space. “Open banking makes it possible to link new methods of payment directly from the bank within third party apps, and as a result, agents can now receive the rent as soon as the tenant pays it,” he says.
Innovator focus
Tim Akinnusi, CEO and founder of MortgageMarket, cut his teeth in the banking industry before launching his own online mortgage aggregator business. Akinnusi’s former positions include MD of Absa Home Loans, and various roles at Nedbank, including group digital marketing manager, head of digital channels and home loans executive. Akinnusi has a BCom and an MBA, and when he’s not hard at work, you’ll find him spending quality time with family and good friends, or playing chess or golf. We asked him to share his thoughts on entrepreneurship and where the property sector is headed.
MortgageMarket is South Africa’s first independent online marketplace for home loans. The company uses technology and innovative service to manage the entire mortgage process online, providing access to local banks, and paying customers a reward for using its services once the home loan application has been approved.
Sometimes innovations don’t have to be tech-related. Godoy says that the sharing economy is a key theme in property innovation, linked to space-as-a-service. “This includes things like co-working, co-kitchens, co-industrial space,” he says. “These are either offered as individual units or spaces on flexible terms, or as fully shared and flexible down to hourly rental, depending on the sector and requirement. These innovations do not necessarily need sophisticated tech in order to be successful.”
One of Absa’s innovations is offering future rental income for property investors. “We are the only bank that unlocks affordability through the future rental income feature if you have two or more properties,” says Ncapai. “You don’t need to be an Absa customer. We’re also the only bank with a Multiplan structure, which means you can structure your home loan into multiple accounts and save on interest by financing more (e.g. Further Advance) over a short period of time.”
Spotting opportunities
Ncapai adds that the industry is fragmented, creating multiple points of friction throughout the home ecosystem, but this means there’s opportunity to drive new areas for customer value by taking a holistic approach and enabling the bank, with its strategic partners, to stay connected to customers through their different life stages.
She believes there’s opportunity to drive efficiency and speed through rapid digitisation, expanding digital capability, and enabling access and inclusivity through the proliferation of the smart phone device in South Africa (delivering mobile-first services). Although she notes that this can only improve accessibility if the cost of data improves over time for the South African consumer, as data costs remains a challenge in South Africa.
Innovation in action
Digital sales platforms: In 2020, Absa launched its online digital application capability allowing customers to apply online in under 15 minutes and providing an instant approval in principle to digital customers, complemented by the tracking capability, which allows the customer to track the status of the application right through to registration. A digital joint application can be triggered by an applicant enabling multiple parties to complete their portions independently. All this can be done anywhere, on any device, 24/7, 365 days a year.
South Africa's first blockchain-based property register has been launched by the Centre for Affordable Housing Finance in Africa (CAHF), research consultancy 71point4 and Seso Global. Read more about this in our State of the Nation feature.
Mega developments: “Smart and sustainable mega-developments like Waterfall City in Johannesburg and Century City in Cape Town show what is possible with proptech and cutting-edge urban design,” says Godoy. “They embrace environmental sustainability, but I feel more can be done for social sustainability, which is key.”
First eco home loan in South Africa, a collaboration between Absa, Balwin Ltd. and the Green Building Council of South Africa, launched in March 2020. Read about this in our previous edition.
Resources
- Proptech Africa connects the proptech ecosystem in Africa in order to create meaningful interactions and relationships.
- Proptech SA, a platform for the proptech industry in South Africa, and for anyone interested in proptech.
- Report on Unpacking the Current & Future Impact of Technology on the South African Property Industry: Identifying Key Features of the Proptech Ecosystem by Sean Godoy and Luke Boyle.