SA real estate sector: time for reinvention?
To remain relevant in a tech-driven, post-coronavirus environment, real estate agents may have to reinvent their business model
The government’s five-week shutdown of nonessential businesses has not only brought an abrupt halt to property sales transfers, with the closure of the deeds office, but it’s also likely to prompt estate agents to rethink their traditional working models.
Will virtual property viewings become the norm if social distancing is enforced beyond the Covid-19 lockdown? Is digitisation the answer to increased productivity and profits for the SA real estate sector? And could SA’s 45,000-odd estate agents become obsolete if a full tech-led offering replaces "warm bodies" in the sales process?
These are some of the questions industry players are grappling with as the economic cost of the Covid-19 pandemic starts to mount.
SA’s new breed of online property portals (or proptech firms, as they are known) include PropertyFox, Leadhome, Eazi Real Estate and BidX1 SA. They already appear to have taken market share from traditional players. Their value proposition is typically based on the offer of a faster, cheaper digital service that allows buyers and sellers to connect without an estate agent as the primary intermediary.
Online property portals typically charge either an upfront flat rate of up to R30,000 or commission of about 1.5% of the sales price — against traditional estate agents’ commission of an average 6%-7% (excluding VAT).
PropertyFox CEO Crispin Inglis says the coronavirus-induced lockdown has forced most industries to embrace digital tools faster than many would have liked, and real estate is no different. He expects innovative, tech-led real estate agencies that have adopted online sales platforms to continue to grow over the short term.
However, Inglis says increased digitisation is not necessarily about cutting out estate agents, but rather about redesigning traditional business and operating models. That cannot be achieved overnight.
"It’s very difficult to restructure traditionally designed real estate businesses to embrace the full benefits of a data-driven estate agency, given their existing infrastructure," Inglis says.
"We are fortunate that we already have tools like e-signatures, online mandate submission portals and automatic data-based valuations as part of our offering."
Eazi Real Estate CEO Richard Day has a similar view. He says though all estate agencies are already integrating online tools into their businesses, albeit to varying degrees, Covid-19 has been the catalyst to speed up the transition from traditional to tech-enabled businesses.
"Technology has changed from a nice- to-have to a must-have for anyone who wants to continue trading and stay in business," he says.
Day, like Inglis, says an online business model isn’t devoid of real estate professionals guiding the process. "Instead, it’s about how digital systems and processes can assist real estate agencies to be more efficient and deliver a better service to clients."
Eazi’s online bidding platform, he says, allows for greater transparency between sellers and buyers, and a more streamlined process.
The challenge, says Day, is that changing to an integrated, online system requires significant investment into technology. "No off-the-shelf product is available. Products will need to be built or customised. People also need to adapt to a new way of working, which many may be reluctant to do."
Day believes the agencies that offer the best value will be most successful in the end. "We strongly believe that online, integrated agencies will be at the forefront, as they are able to save clients time and money," he says.
MC du Toit, CEO of BidX1 SA, agrees. "Technology has never been more important for our industry," he says, adding that digitisation allows real estate players to adopt more agile and secure ways of working while presenting investment opportunities to the market, despite the lockdown.
Du Toit cites a recent online sale of an apartment at "work, live and play" precinct Century City, in Cape Town’s Milnerton, as an example. The one-bedroom property, sold on auction in the lockdown’s first week, attracted 25 bidders who placed 90 bids in total. The final sales price was R1.46m.
"The entire process was completed digitally, with all the bidding displayed in real-time on our website," he says.
Meanwhile, it appears that traditional real estate agents are using the lockdown period to up-skill staff and gear up their digital capabilities to prepare for what is likely to become business unusual in the months ahead.
Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, says even if the lockdown is lifted at the end of April, the industry is unlikely to instantly revert to doing business as it did pre-coronavirus. She believes the use of digital tools in the sales transaction process — virtual viewings, chat bots and customer relationship management (CRM) software platforms — will become the new normal.
Geffen says her company has already concluded a number of international deals online, with the buyers never having set foot in the properties.
"A wave of disruptive solutions and cutting-edge technologies have already steadily transformed the way in which estate agents conduct business," she says. "So we are well poised to take it to the next level. I don’t think we will have any choice but to do so."
Pam Golding Property Group CEO Andrew Golding says his company has, in recent years, built up digital capabilities across various platforms, so it is able to remain fully operational during the lockdown. The group was the first traditional estate agency to cross over into the proptech domain, when it bought stakes in BidX1 SA and Eazi Real Estate last year.
Golding says the group’s sales and letting agents have been working remotely for some time, backed up by personal interaction via phone calls and electronic communication. Online sales without physical viewings are also no longer unheard of, he says.
While the general consensus is that Covid-19 will accelerate the pace at which the real estate sector adopts technology, not everyone agrees that it will radically alter the way in which houses are marketed and sold in SA.
Seeff Property Group’s Samuel Seeff believes concepts such as virtual show houses have been overplayed.
While buyers are happy to search online and make use of digital tools to narrow down choices, few are prepared to sign before seeing a property firsthand, he says.
"We have signed a number of sales in recent weeks, but all are subject to physical viewings once the government lifts the lockdown," he says.
Seeff adds that buying a house is a major investment with significant financial consequences and few sales actually result on the basis of "sight unseen". The only potential exceptions are new developments where people are buying off-plan.
He argues that even proptech players are not making completely virtual sales. "They merely offer a digital platform for private sellers and buyers. Generally the physical viewing and the negotiation process still need to take place in person," he says.
However, Seeff concedes that Covid-19 will force real estate players who are lagging in terms of digital adoption to step up their game. For example, property listings will increasingly have to be accompanied by drone photography, walk-through and virtual tours, and location maps.
The one thing everyone agrees about is that estate agents will still have a role. Eazi’s Day, for example, says while the adjective "traditional" will become obsolete in reference to estate agents, the specialist knowledge and negotiating skills of experienced real estate professionals will remain in demand.
He says: "Proptech disrupters that have entered the market over the past few years have all acknowledged that the most viable business model is a hybrid one, which uses technology to enable property professionals to be more efficient."
Geffen agrees. "Nothing replaces the human touch," she says. "One needs to marry proptech with very capable real estate brokers — the two go hand-in-hand
"It’s a marriage."