AI In Real Estate Is The Future Golden?

There’s a spirited buzz in the property world at present around the transformative power of AI, albeit with a certain reluctance from more ‘traditional’ parts of the real estate sector; historically slow adopters of new technologies.

According to McKinsey, AI could generate over $180 billion in value for the global real estate industry. A significant amount of this growth is forecast within the Asset Management sector, delivering the tools required to conduct analysis to assist with valuation processes. This new technology is already providing significantly more accurate algorithm-based valuations, appraisals and estimates, taking into account factors such as location, historical prices, market trends and demographics and in doing so, optimising the property acquisition and investment journey on a worldwide scale.

Generative AI is a game-changer in the real estate search and select process - creating detailed 3-D models of properties potential buyers can access via their smartphones and tablets. This advanced technology is also widening the pool of potential buyers, since anyone with a digital device can ‘tour’ their next forever home or place in the sun from the comfort of their sofa. In tandem, sellers and agents save significant time and money, since would-be purchasers are pre-qualified – whittled down to only those who are truly in it, to live in it.

The property management sector is a further benefactor. Agents can niftily vet tenants, collect rent, and schedule in essential maintenance at the touch of the keyboard. Automation through AI, streamlines payment processing too, managing workflows and collections, with AI assistants deployed to generate reports to track leasing performance, driving occupancy and operational efficiency.

As for mortgage applications, underwriting billed as a ‘relative breeze’, has to be a first. Think information analysis such as credit scores, income and employment history to evaluate a borrower's risk profile and find the best rate to charge, plus tools to detect and prevent fraud and automate loan servicing tasks.

Perhaps the most common and practical usage of AI in real estate, however, is that of predictive analytics. Forecasting is a vital piece of artillery; investors, lenders, agencies, and economists will all be using AI to predict where the real estate market is headed, stealing a march on the competition to buy/sell, negotiate and trade at the right price.

But while there’s no doubting AI’s potential – hard-to-crack challenges lie in wait; data privacy being the biggie. AI applications invariably require access to personal and financial data, raising concerns over secure data storage and ethical use. Lenders, agents and appraisers are expressing concern about their work product being used to train generative algorithms that compete with them - and it’s not an unreasonable concern.

A further risk is bias in algorithms and the potential for fair housing violations. AI is proficient in identifying patterns, so it can make recommendations based on initial user preferences, to continually narrow results in a housing search, for example. Depending on how narrow the search results become, this could effectively nudge people to certain properties and neighbourhoods. Nudging is nudging, even if an AI did it.

All said, it’s hard to dispute the significant advancements that AI can offer and as we embrace these technologies further, we can expect even more sophisticated real time enhancements. In a sector where human engagement, intuition and expertise are crucial however, we just need to ensure we harness these tools for our gain, not our extinction.