FinTech And PropTech – The Future Of Financial And Property Investment?

How do you feel about the use of technology in property investment?

Do you think it is a good thing?

Technology does make our lives easier in a number of ways. The Internet has revolutionized how we communicate with each other and it was only going to be a matter of time before technology became a useful tool in property investing.

In this post I want to discuss FinTech and PropTech and the impact that I think this kind of technology will have on the property investment industry. First of all let me explain what these both are if you are not too sure.

What is FinTech?

FinTech stands for “Financial Technology” which you probably already worked out. It is a term used to describe applications and other digital technologies used in the financial services world. In recent years there has been significant growth in the number of applications that customers can use for financial services.

There have been a number of business startups dedicated to FinTech over the last few years. The applications that these companies create often challenge the traditional financial business models that have existed for years.

The creation of technology like blockchain has seen many companies, large and small, rethink the way that they do business. Blockchain is a decentralized system that creates immutable records (cannot be changed) and is very different to the traditional “client-server” based technology that has been used for years.

Blockchain is the technology behind Bitcoin and most other crypto currencies. The UK leads the way with FinTech which is not surprising considering the position of London as a worldwide financial hub for financial services and trading.

What is PropTech?

No prizes for guessing that PropTech stands for “Property Tech”. This is not some brand new thing aimed at smartphone users. It has actually been around a long time and giants in the residential property business such as Rightmove and Zoopla have been using it for over 10 years now.

PropTech is a lot more than just the digitalization of the property market. It has the potential to offer us a great deal more than that. PropTech can provide answers to questions such as how we feel about the purchase of property and the value that we get from doing this.

The residential property market seized on PropTech first as it provided a way to present property portfolios online to attract those interested in renting and purchasing. In more recent times property developers have taken a keen interest in AR (Augmented Reality) which can be used so that customers can experience a “walk through” of a property.

Other possibilities are certainly there such as using PropTech for people wanting to control their experiences around property. Think about controlling the temperature and lighting of your home remotely or find the most suitable parking space in the shared parking area of your apartment block for example.

The UK government is committed to a digital revolution in the world of property. The current housing minister for the UK, Esther McVey, has plans to release the data that local bodies hold to assist PropTech in the UK to grow and thrive.

How will FinTech and PropTech affect Property Investment going forward?

I believe that PropTech is going to provide us with different ways of making property transactions in the future and accessing some of the available properties on the market. It has the potential to make property transactions a lot simpler and faster than with the conventional methods that are still widely used today.

I can see PropTech and FinTech combining by providing another way for people to invest their money or even borrow money. For example you should be able to use your property as collateral using both FinTech and PropTech in the future if you require a loan. You could also use your current assets to make an investment or part investment in another property.

There are a number of companies focused on property equity these days. With property equity an investor will be able to purchase shares in a single property or an entire range of properties. There are a number of financial benefits to property ownership as you know – and this technology will make these available to a lot more people.

One of the biggest problems in the UK at the moment is that the average house prices prevent a lot of people getting their foot on the property ladder. They do not have enough of a down payment to buy their first property despite various government incentives. Some people actually prefer to deploy their money elsewhere rather than spending huge sums on property.

So the concept of buying shares in a property is going to appeal to these people as well as others. Technology has made this happen and now many people who have been unable to get into the property space can now do so with a computer and an Internet connection.

If you want to invest just a few hundred pounds in the share of a property you can do that. For those that want to invest thousands they have the ability to do that as well. I think that FinTech and PropTech provide property investors with another way to diversify their investments.

Having small shares in several different properties is less risky than having a large share of a single property. When you think about it there is a sizeable risk to purchasing a single property and making a good return with it. You can never predict how house prices are going to go and there is always a chance that you will not be able to rent out your property.

When you own more than one property the level of risk rises even further. Things can, and do, go wrong with property transactions. You can lose a lot of money trying to purchase a property and the sale falls through for some reason.

Once you acquire the property then you are trusting your experience and knowledge when it comes to making a worthwhile buy to let return on your investment or the profit that you are looking for with a flip.

What about Property Crowdfunding?

If you have not seen my post on property crowdfunding then please take a look at it here. Property Crowdfunding is a great example of how technology provides greater opportunities in a market.

There are a number of UK based property crowdfunding websites now and their popularity is growing. There are a lot of young people using these websites to invest in property because they know that it is the right thing to do. They see it as a good way to plan for their future and their retirement.

Technology by Jeffrey Sofroniou

Although I have not made any transactions using property crowdfunding yet, it is certainly something that both interests and excites me. I firmly believe that I will be able to access other property investment opportunities that I would never have been able to on a personal level or through my property investment business. There are bound to be some teething problems with PropTech but so far it has made a positive impact and I believe that this will continue. So my recommendation to you is to embrace this technology and have a look at some of the new opportunities that it can bring you as a property investor.

Harvey Raybould

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