On 15 September, Episode 1, the venture capital firm, held a Property Tech roundtable at Bloomberg’s office in Finsbury Square – a space combining traditional architecture with contemporary design and state-of-the-art technology – more than fitting for a debate on using technology to disrupt one of the UK’s most traditional sectors.
With an emphasis on residential property and how tech can help address market failures, the roundtable comprised a panel of PropTech founders including Alex Chesterman of Zoopla; Russell Quirk of the online estate agency eMoov; Daniel Gandesha of Property Partner, a crowdfunding platform for residential property investment; and Jonny Britton of Land Technologies, a platform which makes it easier to source land.
Simon Murdoch, managing partner of Episode 1, who served as moderator for the debate, told the audience of property and tech professionals that Episode 1 had £40m to invest in early stage tech businesses and wanted to get more involved in PropTech. Introducing the panel, he asked them to talk about their businesses and what excited them about the sector.
Explaining why PropTech was so interesting, Alex Chesterman said: “We are just at the beginning of the transformation that digital can bring to this space.”
Russell Quirk added: “There are some really exciting platform elements that can be added onto existing tech businesses like ours.”
He said tech had allowed eMoov to provide better service and performance, but he warned that it was “not a substitute for customer service.”
“It doesn’t mean you can automatically deliver customer service; you need to have a blend of brilliant people and brilliant tech,” he said.
Kicking off the debate, Murdoch asked the panel if they agreed that there were not enough houses in the UK and asked what could be done about it.
Responding first, Quirk said: “I totally agree.”
“We are currently building 135-140,000 homes per annum in the UK and the clever thinking is that we need something like 250,000.
“This is the result of net migration, people living longer and also something like 20 percent of homes are lived in by single occupants. This is a stat that is just growing and growing. Different governments haven’t been able to do anything about it and I do think it’s a crisis. Labour politicians talk about it as being a social housing crisis. If houses aren’t being built to any significant number, you’re not going to have social housing because social housing is a percentage of total housing build.”
Quirk added: “we shouldn’t be so precious about our green belt.”
“We need to think not about the green and pleasant land but the unsightly parts which the planning officers default position is to say no,” he said.
But land expert Jonny Britton said building on green belt was the “easy solution”.
“You can turn more greenfield land into brown, you can make policy tweaks so that planning goes through quicker, or you can build it or lose it – 50 percent of planning permissions are not being built,” he said.
“Local councils should release more data such as where their assets are and where their land is. We’ve now got great ability to mine data; using technology you can reduce the price of a site viability assessment. No big company will want to build at mass; they will always want to dribble out supply. With more viability assessments for the small plots, it will allow more companies to come to the market with new business models trying to do interesting things on smaller sites. It allows more supply to come to the market.”
Daniel Gandesha agreed. “Innovation unlocking the supply side is key,” he said. “Large developers do not have an incentive to build as fast as they can and lots of smaller developers are finding it difficult to finance their project because they don’t have the balance sheet to allow them to sell off plan.
“We believe we can help with forward purchasing supply from (small) developers – allowing them to build that stock. The government should look at the new models that are coming out and understand how to leverage those rather than sticking to tried and tested policies that haven’t worked in the past.”
Chesterman added: “It’s not just the numbers. I also think it’s the mix of homes and making sure that we build the right assets. If you look at the issues within the market, the big struggle is obviously the first time buyers… and being able to get onto the ladder. The two or three key areas are the bureaucracy, planning behind it, and releasing the right sites.”
He continued: “There are significant land banks being sat on by some of the largest developers in the country. It is not the land that is the problem, it’s the lack of incentive for them to do anything with the land. The government has an important role to play here. Incentivise the release of those plots, incentivise building faster, and incentivise the right type of properties and the right price.”
“In another life I was an elected member of Brentwood Borough Council,” said Quirk. “I was a Planning Chairman and Chairman of their Asset Committee. When I first got the job, I asked the planning offers what land we owned and they didn’t know. I did some research and discovered that there are 180,000 land assets that are owned by local and national government, which in my view could be turned into housing sites very easily. It’s something like £300bn of assets. What they have to do first is identify those sites.”
With reference to the North-South divide, Murdoch asked the panel if technology could help to relieve pressure on London and the South East.
“You would intuitively think that as more people are allowed to work flexibly you would see less migration, but actually the opposite is happening,” said Chesterman. “We allow people to work from home if they want to, but what we are finding is that the vast majority of people, particularly in the tech space, have a natural gravitation to be in and around where the activity is – and the pressure on London is continuing to build.”
Britton suggested that technology in transport could play a role. “In China they have built 100,000 miles of high speed trains in the time that it has taken us to have a conversation on HS2,” he said. “You could go even further into the potential transport that could be coming and that would really take the pressure off.”
But Gandesha, as an owner of a small tech business, said “city clusters” were essential for growing businesses. “We need to think about the international landscape and making sure that the talent is available,” he said. “It’s not that I’m against moving away from London and the South East, but equally the people setting policy should be careful that we are not damaging our international competitiveness.”
Highlighting stats on growth of the private rented sector, Murdoch asked the panel where they thought the trend was going and what it meant for Buy-to-Let properties.
“The government put together a task force which identified that there is £10bn of institutional appetite to invest… in Build-to-Rent,” said Gandesha. “There is an acknowledgement that we need more rental stock, but Buy-to-Let doesn’t help to create new stock. It is dominated by people who own one or two properties. They don’t really think about rising mortgage costs, maintenance and other expenditures – just gross rental income. Osbourne’s Budget changed the ability to offset interest against rental income. We’re going to see a shift away from Buy-to-Let to professional ways of investing. Hopefully, we will see the end of the cottage industry of Buy-to-Let and more people investing through large-scale institutional funds or platforms like ours.”
When asked by Murdoch what the next property innovations would be, Chesterman said Zoopla was in a “fortunate position” to see first-hand what was going on. With a lot of PropTech businesses looking to partner with Zoopla, Chesterman said it gave them “greater insight” than most. “We operate the second/ third biggest property website in the country so we get to see a lot of up and coming businesses,” he said.
In terms of opportunities, Chesterman said: “There is a mobile impact on everything and the consumption of data is becoming interesting. These guys (the panel) are great examples of three particularly interesting areas within the space. There is the estate agency model and how that is going to be transformed over the next ten years, and then the financing – there are lot of interesting things going on.”
Murdoch’s final question for the panel was to ask what areas they found “particularly interesting”.
Britton responded that the “connection to services in real time” and being able to “get access to information fast that is specific to an area” would allow tech platforms to “rethink” the way people might be interested in property.
“Data is an interesting one and the cleverness of data,” said Quirk. “In my industry that’s the things that trigger someone to buy or sell a home… it might be a pregnancy or it may be a child that is reaching school age. Stuff like that which can be fed into a platform where you can start second guessing behaviour. Also, the collaborative element between various property tech businesses that allows very interesting things to happen.”
Gandesha added: “I’m interested in anything that starts with a consumer problem and works backwards.”
At the end of the debate, there was time for a few questions from the audience – during which – Quirk was quick to point out that “all estate agency would be online after 2020”. All in all some interesting points from a useful debate, which is sure to spark further conversions on the topic.