Prop-Tech

Here in the UK, we are fortunate to have truly world-class real estate and tech sectors, however, is there scope for the two sectors to be doing more together?

Prop-Tech is technology which is accelerating processes within the property sector which includes renting, buying or managing property. Prop-Tech solutions can also have positive commercial benefits for developers and investors, where decisions around site acquisition, funding and demand could be made simpler, more efficiently and far more accurately. But is it being used?

The global Real Estate industry is one of the most important sectors of the global economy with key parties operating within in, including: financial institutions, contractors, developers, retail operators, industry, public sector along with asset operators and banking. However, it is one of the least digitized industries with little investment in innovation and technology over the decades.

One of the biggest reasons for this also becomes one of the biggest barriers for the future success of Prop-Tech, and that is the culture within the real estate sector. Property is an old sector where people typically acts in more traditional ways. There are currently some excellent platforms and products on the market which have been derived through data and AI however, the issue is that most property professionals within the sector do not necessarily accept or appreciate that a problem exists, so for Prop-Tech companies, the challenge is convincing these organisations that the gaps exists for these technologies.

The good news is that we see some key areas where positive change can help increase the use of tech within the sector which would also have excellent economic benefits. Good quality innovative approaches can support challenges across our planning system, community engagement, large-scale regeneration projects, the private rental sector, social housing and achieving net zero through sustainability.

Government should also be waking up to embrace Prop-Tech in dealing with some of these incredibly outdated approaches, the planning system alone – we are seeing developers waiting 18 months for some planning decisions in the UK because we have old manual archaic systems which have not evolved in decades.

We would like to see further Government opportunities – not just for funding but also the chance to embed tech within processes including procurement, consultation and to see more policy changes being driven by data science and AI.

Government also has an important role to play in fostering relationships with the private sector in order to make it easier for existing Prop-Tech companies to bring their skills and platforms forward, rather than those companies working in isolation to educate the market.

The good news is that we are starting to see a shift towards Prop-Tech, a global industry now worth $25bn with an expected compounded annual growth rate of 15% until 2030.

Goldman Sachs Backed TopHat To Receive £70m Investment From Aviva and Persimmon Homes.

UK based modular house builder TopHat has raised £70m from investors FTSE-100 listed house builder Persimmon, and Aviva.

The fundraising, backed by new and existing investors, is being led by Persimmon and Aviva Capital Partners.

Existing shareholder Goldman Sachs Asset Management also committed capital to the round of fund-raising with Homes England considering making a commitment. Homes England also funded TopHat’s development at Kitchener Barracks in Chatham in the acceleration of housing delivery in the region.

Modular housing delivery typically offers investors increased returns whilst lowering carbon emissions. This is due to the reduced time spent on site and the ability to better manage time lost due to bad weather and trades teams overrunning as a result, this is why we have started to see advancements in this type of housing delivery across the UK.

The funding will help the firm open Europe’s largest modular housing factory, from which it will manufacture up to 4,000 ultra-low-carbon homes a year.

The investment will provide Persimmon with guaranteed access to energy-efficient volumetric modular units as well as TopHat’s innovative brick façade to use with their Space4 timber frame products.

This will provide further build efficiencies, manage the growing challenge of labour shortages in key trades and expand Persimmon’s product range for their customers.

This collaboration also shows how Aviva is using its financial strength to invest in the sustainable infrastructure and real estate which are central to the UK’s net zero transition within the Construction sector.

Housing Market Update By Ummar Hanif

Headline Facts:

  1. Average UK property prices have increased by 0.2% to £366,247 in the month of April.
  2. The annual rate of increase was a modest 1.2%
  3. Value of first-time buyer homes hits record high
  4. The market has also seen sellers lowering their expectations to reflect economic reality

UKDC has seen that, despite economic and political turbulence, the UK’s property market has performed well in April, which we believe in part was down to the stabilising of mortgage rates and more realistic pricing by agents and vendors.

The average price of property listed by UK estate agents in April increased by 0.2% – or £890 – compared to the previous month, as traditionally more people put their houses up on the market at Spring time. 

The rise is notably less than the 1.2% typically seen at this time of year, and marks a smaller monthly rise than the 0.8% recorded in March. However, it says sellers are pricing realistically to tempt seasonal buyers.

Rises have been recorded in all regions across the UK this month, with the exception of London and the North East which have seen falls of 0.5% and 0.1% respectively. Scotland posted the biggest monthly rise at 3.2%.

The average cost of a UK home currently listed for sale now stands at £366,247, which is 1.7% higher than last year.

While the general rate of growth is slowing, average values of typical first-time-buyer homes (which are defined as two bedrooms or fewer) hit a new record high of £224,963 in April. 

We believe that rocketing rents was a key motivator – for those able to clear the mortgage and deposit hurdles – to get onto the property ladder.

Mortgage costs have also stabilised from their peak of more than 6.5% following last autumn’s Budget announcements. The average cost of a ‘first-time buyer’ 5-year fixed rate mortgage with a 15% deposit now stands at 4.46%. 

However, while costs have continued to edge down, the average rate for this kind of deal stood at 2.64% this time last year which represents a significant increase.

The number of sales being agreed in April suggests a healthier market than many expected. Levels are just 1% under the pre-Covid figures for March 2019, and above those seen in September before they plummeted by 21% following the Budget.

However, at 18% behind last year, agreed sales are consistent with more normal levels of market activity.

Agents have also been reporting that many sellers have transitioned out of the frenzied multi-bid market mindset of recent years and understand the new need to tempt spring buyers with a competitive price which has been reflected in the current market conditions. 

The good news is that buyers and sellers appear to have adapted to and accepted the current economic and property market conditions. 

This means that there are now more attractive fixed rate mortgages available providing buyers with more confidence, and there has been a noticeable increase in sales activity which in turn has seen the markets moving again.

A Snapshot of The UK Property Investment Market With Ummar Hanif.

The strength of Investments within real estate have never been so important. The last 30 years has shown the world that the, UK property sector has a long, credible record of resilience and stability in times of wider economic uncertainty.

Before the pandemic, we had seen a ‘city-centre renaissance’, leading to strong house price and rental growth across major UK towns and cities. This was driven by strong demand for town and city living with a chronic shortage of high-quality rental property in these locations. We forecast an average of 20% growth across major conurbations including Manchester, Leeds and Birmingham over the next five years, this is for both for house price and rental growth.

UK house prices rose by 20.4% over the last three years, compared to just 8% over the previous three years. While growth is starting to return to normal pre pandemic levels, this shows how the UK property market remains resilient despite wider economic turbulence.

The rental market is also seeing significant growth, with key drivers cited as the strong demand for city living, the end of Help to Buy, and rising mortgage rates, meaning a proportion of prospective buyers have delayed their decision to purchase and remain in the rental market. This has driven rents up, further impacting the supply and demand imbalance which underpins the rental growth across all major UK cities.

We are therefore still seeing a significant number of enquires from institutional investors relating to new build to rent projects with city centre locations. This is still one of the fastest growing and most attractive asset classes in the UK for large financial institutes, a trend which we expect to continue.