Watch out for South America; the fast follower
I write this at 34,000ft. I am flying between Santiago and Bogota, names I had no real recollection of until two weeks ago. I had the great fortune of keynoting at the first LATAM PropTech Summit in Chile and it was a fascinating experience; obviously because it was in Chile but one of my passions is looking at and trying to understand new markets.
Having done some work previously in Argentina, reviewing the PropTech landscape, I was well aware of both the opportunities and challenges in the region. Having said that Chile is far behind Argentina and experiencing it in the flesh was well worth the 20hr journey time.
Nearer the bottom of this article you will hear me talk about fast following, taxi drivers and my severe lack of Spanish!
It was the first time a PropTech conference had been put on in the region. Mrkte, headed up by Andrea Rodriguez Valdez and her partner Ruben Frattini, put on a decent show given it was the first one. Initially they had expected 150 people to register for the event (was a paid event by the way) but nearly 400 turned up on the day.
It was interesting to note that 75% of the audience were property people, not PropTech. This certainly bucks the trend from previous conferences I have attended in the early days where a strong community of PropTech founders drive the conversation but here, perhaps because PropTech is in the early stages here, the traditionals were the ones who really took part.
The atmosphere felt very similar to the one I experienced in Indonesia late last year too. The traditional industry were paying attention. They wanted to learn. I suspect they have heard much from the US market, and possibly the Spanish, about the impact of technology, and are keen to get in early.
Obviously this doesn’t mean that everybody is pushing change. I would suggest the construction sector were nowhere to be seen. Is this unique to Chile or perhaps more a wider issue? I think the latter. There is a fundamental disconnect between property and construction and thus PropTech and ConTech. The two simply don’t meet and yet they are dealing with the same asset class.
Suffice to say I expect huge developments here in coming years given the demand for the sector in South America; the demand for housing is the same the world over. We need more of it and affordability is a key theme.
Anyhow, I closed the conference but Steve Weikal, Head of Institutional Relations at MIT, opened it by video link (or recording I should think). An interesting, if a little bland, speech talking about companies that MIT are looking at.
“In 2014 we were looking at 20 PropTech businesses. Now we are surveying over 2,500” Steve said at one point. Certainly shows the growth but I think he was about 50% of the total number. There are at least 5,000 PropTech businesses globally and I would suggest that would be over 8,000 if you bring in the Construction side of things too.
He gave a particularly useful list of PropTech businesses in different fields but that was it; he was gone. It’s a shame as I am sure the audience would have appreciated more knowledge about what MIT are actually doing as part of their research – for example this just got released this week; I certainly would have liked to have heard about their robot training methods to help out round the home; however conceptual the project is.
Otherwise the day was split into some particularly interesting panel events with lots discussed and generally the attitude was very inclusive and there was a genuine interest in the sector.
Ruben, one of the organisers, hosted two separate panels, each introducing 8 different PropTech starts ups (some weren’t really start ups it has to be said), that would have given people a flavour of the tech out there.
General points – online agent battles
Having delivered my speech it was time for a few beers. It was interesting to hear some of the war stories of the start ups.
Last year, while in Argentina, I met with Pablo Brodsky, a classic entrepreneur (first venture was bringing micro apartments to Argentina), who was just about to launch Lugaren, a copy of the Purplebricks and emoov models of online estate agency.
It was interesting to hear that the model was well received in the last 9 months but, critically, he has been tied up with huge regulatory issues. In his case, not around whether he can legally operate (he has a real estate licence) but about the commission he is charging. It is so much lower than the traditional agents that the country’s real estate body seems so concerned that he could truly disrupt the sector.
I am not sure it will end soon either. Commission structures in South America (and most of Europe for that matter) charge both the buyer and seller to move. Models like Lugaren potentially risk making it a one side charge (though they are not doing this currently). This model could truly upset the apple cart.
General points – property portal competition
I had a welcome few discussions with portals from several countries. Most have started from more general classified sites that have a property arm. All are looking at ways of cementing their position. They are considering how they diversify their product mix to look after customers for more than just the sale of their property.
Interesting to see Properati, headed up by Gabriel Gruber, also recently diversifying into the FinTech space with Crederati. There is a very distinct move to create multiple platforms there and to continue their dominance in Argentina. I wonder what others will do?
One this is certain. With a lot of South America speaking Spanish, there is a huge opportunity for one of those portals to rule all markets if they get their proposition right.
General points – build to rent just getting going
In the US and the UK Build to Rent (or Multi Family Housing) is a hugely important and burgeoning sector. Everyone is talking about it, developers are trying to understand how they can change their developments to hold rather than sell and there is general excitement about it.
In Chile it is just getting going but I suspect it is going to be a bit of a false start. From several sources I heard that there are issues with several developers simple building shoddy developments for multi family use without the property provision. Lets hope it doesn’t spoil the sector before it gets going.
Ultimately, Chile are just in the midst of passing a regulation that means insurance companies and pension funds can invest in the sector. They need water tight guarantees that it is being well looked after for the long term so that their investments will be safe.
Build to Rent needs to be well thought through and planned correctly. Lets hope it all fits in well.
I worked for a Spanish company for seven years and can only say the basics. I can’t even say the traditional “Cheers” when enjoying a drink (most of my staff were Nordic and so Skol was more acceptable!). This certainly hindered my trip a bit – not least my experience upon arrival.
I got 100% fleeced by a team working for and with the local taxi drivers. I was charged an exhorbitant amount of money to get to my hotel which didn’t get my trip off to a great start.
Having got that out of my system though, the conference was a great success. Nearly 400 paid guests on a first conference just shows a/ the organisers know what they are doing and b/ the market is ready for PropTech.
With an approximate number of 5,000 PropTech businesses around the world, there is also a clear opportunity in South America. Whilst other continents and countries will have got a head start on LATAM this means they can have the benefit of hindsight. They will be able to learn from our mistakes.
If I could speak Spanish and lived out this way, I would get on a flight to London or New York, find the successful PropTech businesses (and the failed ones) and absorb all the information like a sponge. Then head back, adapt the model for the local market and BANG. There you have it.
Alternatively, if I was young, could speak Spanish, had no ties, I would be getting on a plane out to South America now (or Mexico perhaps as I hear it is all happening there too), and set up a business. This will be a fun few years.
LATAM will not need to reinvent the wheel. It can simply get going by building on top of a great engine.