What’s next on the value chain for property portals?
Mike DelPrete* analyzed different verticals propety portals worldwide have been adding/investing over the years. He covered all existing categories including Home Inspiration, Home Repair and Services, Valuation and Data, Agent Profiles, Advertising, Mortgages, Insurance, Moving, Utilities.
There is no surprise, “data and/or data services” took most of the strategic players by storm. As I handpicked some of the great examples on my previous article**, for some, data is becoming the core of the portal rather than just another vertical on the value chain. However there is one more area that I believe is destined to be the fastest growing vertical in the coming years; “investment”.
Back in September 2016, Zoopla announced the launch of a new ‘Invest’ channel. It offers consumers and would-be property investors the opportunity “to gain exposure to the UK property market from as little as £100”. Currently the section consists of two parts. The first one is peer to peer lending, in partnership with Landbay, people can invest into buy-to-let mortgages. The other part includes a tax-efficient first online property ISA, in partnership with Bricklane, allowing savers to invest from £100 to own a stake in a UK property.
Can we expect others will follow Zoopla on that end? Will “investment” category turn out to be next trendy topic? I say, yes. Despite all the hurdles, there is a rationality why this is going be big in the coming years
- Millenials’ perception towards real estate and their investment appetite
We all know the access economy is here to stay. It transformed the way we accomodate, the way we transport, the way we listen to a music etc. Now it’s here to disrupt the way we live in. Buying a car will be obsolete in two generation time maximum, let alone 30 years mortagages. Co-working, co-living, digital nomads, crowd-funding…They are not just fancy trends
- The Generation Rent
A British buzzword, Wikipedia defines it “a generation of young adults who, because of high house prices, live in rented accommodation and are regarded as having little chance of becoming homeowners”. There is a growing mismatch between the increasing cost of housing and the median earnings in many cities around the world. Even if they want to, they cannot afford to buy a house. In fact, those on median incomes, who work in central London have had to move to the outer suburbs, and the commuting towns in SE England***
- The rise and the merge of Fintech, PropTech (Regtech, Insurtech) in general
There has been an absolute boom on innovative financial services. Patch of Land, Bricklane, Fundrise, EstateGuru, RealtyMogul, Brickx, Point… Property portals are natural distribution platforms for all these companies trying to solve different problems with innovative business models and offerings.
- More regulated real estate financial products -for the end-users-
Yes, real estate investment products are not universal, regulations are different in many countries. However we see different schemes have emerged especially after the latest economic turmoil. If you want be in the residential property market even with £100, peer-to-peer lending could be a solution. The platform provider -Landbay in Zoopla’s case- allocates the money it collects and lends it out to residential property investors in the form of buy-to-let mortgages.
Property ISA is another product you can invest with as little as £100. All the cash collected are held in special fund to purchase buy-to-let homes in the country. Your investment then follows the ups and downs in the real estate market and receives rental income on top. Thanks to regulation, both your income and equity gains will be paid to you free of tax.
If you want to invest into a relatively sophisticated product, property funds could just be right for you. A property fund is just a trust or open ended investment company which happens to be invested in property -mostly commercial properties. The cost of the shares or units (in a unit trust) of the funds change on a daily basis depending on how the fund is performing.
My favorite company Point offers an alternative to traditional home equity loans. It allows consumers sell a piece of their home equity to investors, -eliminating interest payments-, rather than borrowing against the value of their houses.
When the cost of a property is shared between the buyer and another organisation such as the Government or private company, it is known as shared equity. Buying a property through a shared equity scheme means that whilst you might pay for 80% of the price of that house, the other party will pay the remaining 20%.
- Property portals as traffic hubs
In most of the countries, successful property portals are among the top 10 most visited web sites in all categories. It’s a logical adress for newcomers to be able access portals’ existing clientbase. People do not buy property all the time but may invest real estate financial products more frequently.
- To be associated with “expertise” and “knowledge”
By teaming up with the leading platform providers offering investment products help property portals tap into the financial markets. They will enjoy being associated with the “knowledge” whlist securing their proposition.
Notice that Zoopla positioned itself as a distrubiton channel and partnered with two other companies -start-ups- offering such products and services. Property portals could even evolve into aggregation sites in the long run when there will be too much competition and the market is highly fragmented. My guess is that new generation data-powered property portals in developed and regulated countries will be quicker to adopt this niche-than classified-focused ones.
Let’s see how the market evolves.