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Data line

23.10.19

Technological data systems have reshaped many industries in recent decades, most notably the finance and banking sector. The first data systems emerged in the banking sector in the 1960s, when machines such as the Quotron began to deliver stock market quotations directly to users via electronic screens. Brokers, traders and investors were able to monitor prices more quickly and easily than they could with the old apparatus of printed ticker-tape machines and telephones. Since then, finance has been one of the sectors at the forefront of using data to drive efficiency.

In contrast, the property sector has been much slower to adopt these practices and in real terms is probably two to three decades behind the financial sector. Without new data systems to monitor and respond to market forces, property companies will fall behind the curve as new technologies are adopted and companies that fail to innovate will not survive in the long term.

The changes brought about by new technologies often initiate a consolidation process. Introducing more efficient business practices that allow smarter companies to either outplay or buy out their less efficient competitors. Agents and property companies that wish to survive in this new market will have to provide other, value-added services: competing not on pricing per transaction but on the value they provide.

Transaction costs in other areas of real estate such as conveyancing, surveying, and legal services are also likely to fall as service providers gain access to new technologies and software that allow them to ‘do more with less’. As those technologies advance, developers, agents, and investors will no longer need to outsource specialist work. Data and analysis systems will allow them to bring these tasks in-house at a fraction of the cost.

This reduction in transaction costs can already be observed with the emergence of fixed-cost and low-cost sales and lettings agents such as Emoov and PurpleBricks. The market appears to be in a process of ‘price discovery’, as different low-cost agents attempt to find prices at which they can be both competitive and profitable. While a ready flow of investment capital may underwrite short-term losses in favour of market share, steady pricing should begin to occur as the right standards of success and service delivery emerge among the new low-cost agents.

Ultimately, anything that can be done by a machine will eventually be automated. As this shift occurs, human roles will start to change from administrative tasks to consultative sales, structuring and relationship networking. Resulting in the restructure or closure of companies that fail to evolve.

Recently, share prices in leading UK property companies have fallen dramatically. Profit warnings for both Countrywide and Kier Group sent their shares prices plummeting. Countrywide has lost 93% of its value since September 2018, dropping a dramatic 11% in June alone. At its current value, it is worth less than 1% of what it was at its peak in 2013. Likewise, shares in Kier Group have lost more than 85% of their value in the last 12 months; it is subsequently cutting 1,200 of its jobs and selling its assets in cost-cutting moves.

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