Good morning, this weekend, we binged on Long Way Up - a British television series documenting a motorcycle journey undertaken in 2019 by besties Ewan McGregor and Charley Boorman.
The jaw-dropping beauty of places and people, from Ushuaia in Argentina to Los Angeles in the United States, was captured by the duo astride prototype Harley-Davidson electric motorcycles, supported by prototype Rivian electric SUVs.
As we transitioned from binge watching to newsletter writing, we realised that real estate technology is doing its own long way up too. More on that as you read on.
🍎 Have a great Monday ahead.
How A Sellers' Market Affects Real Estate Brokers
Well, how else do you think - a sellers' market means brokers representing sellers have to reduce their commission rates.
How On Earth?
Not exactly rocket science. When housing prices skyrocket (effect), it is a clear indication that demand is way ahead of supply (cause) and there is a housing shortage.
This also means that every home on sale is likely to get more than one offer. Because of such a favourable wind for the seller, this weather is known as a sellers' market.
The increased confidence in the market leads home sellers to sit down with their brokers over a cup of ginger chai and ask them to lower their commission rate.
Proof Of Concept?
This report from Redfin shows that buyers’ broker fees can drop considerably in a seller's market. In the US, average commission rate for sellers' agents was 2.63% of the selling price of a home during Sept-Oct-Nov, 2021, down from 2.69% a year earlier.
Plummeting sellers’ broker fees is a reflection of sellers’ power, considering they’re the ones who pay these fees.
Does That Hurt Brokers?
Alright, let's take the help of some numbers. Per the same report, home prices have increased so rapidly that it has offset the declining commission rate.
In dollar terms, the average seller was paying the broker USD12,415; up from USD11,609 in 2020, even while the commission rate touched record lows.
😅 Clearly, real estate brokers aren't the ones going back home empty handed from a seller's market.
Hey! Where Are The Kids?
Zoho Corp CEO, Sridhar Vembu's recent tweet:
👀 Caught our eye, and
💭 Got us thinking about the affordable housing crisis
🎙 “I was visiting friends and family in Chennai. What struck me coming from a village with plenty of kids is how older apartment complexes in affluent areas are strikingly devoid of children.”
“Reason? Young families cannot afford to live in these neighbourhoods, so only people who bought decades ago when prices were more reasonable remain.”
“Bubbles have serious demographic consequences," Sridhar signed off.
Time Travel Is Free
One of the easiest ways to suppress the blues is by converting the image into black and white. And that's why when a Monday begins to take on a blue hue, we often apply the monochrome hack to make starts easier.
For example, here's how the Madras (now Chennai) Esplanade looked like one Monday morning in 1910. See? No blues.
😍
Proptech's Doing A Long Way Up
Proptech has been making a steady progress per JLL Technologies, which reported that the number of proptech companies has increased 4X over the last 10 years - going up from 2,000 to 8,000.
Just Getting Warmed Up
Despite this fourfold jump in proptech ventures, the current landscape offers more opportunities than ever, feel experts.
If you like to stay abreast with the latest, keep these three real estate technology trends in mind.
1️⃣ Proptech Expansion To Continue: Per this Forbes report, it’s likely that newer technologies and investment markets will begin to make a larger impact on the the real estate technology space.
Specifically, you might want to keep an eye on;
- Virtual Tours/AR/VR
- Online Transactions/e-signing/e-documentation
- Conversational AI
- Automation of Property Management
- Big Data
- Blockchain
- Real estate crowdfunding platforms
2️⃣ M&A Deals To Remain High: In the proptech space, the period of Jan-Sept 2021 recorded 40 merger and acquisition (M&A) deals, per this report, up from just 18 deals in 2020, which put 2021 on pace to see record levels of activity. Notably, 90% of all M&A deals in 2021 were strategic consolidations.
3️⃣ Investment To Remain High: The 2021 Real Estate Tech Venture Funding report said that VC funding in proptech stood at USD32 billion, the highest for any year till date. This year should be no different for investments, feel industry watchers.
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Selling a home may not only be the biggest financial transaction most people will undertake in their lives, but also the most emotional one, especially if they have their hopes and dreams tied to that home.
This Khaleej Times report on heart felt stories of people who parted with their homes and moved on, is worth a deep dive.
See you again tomorrow morning. 💚
☕ The Crew@Ginger Chai