Real estate: 10 big trends for 2023

Inflation, interest rates, war: real estate profitability expectations have dropped to low levels in 2023, Pwc suggests in a recent report. But there’s more to the story: the sector is changing at a fast pace, with plenty of opportunities for those who seek them. Technology may be the industry’s biggest hope: from sales to contracts, mortgages to renting, the so-called “digital twins” to a more efficient energy management approach, right on through investments and proptech, the future is knocking at the door, bringing with it new business perspectives and fresh opportunities.
These topics were discussed during “Banking for home and living: digitalization, platforms and ecosystems”, a public panel part of a series of community events held weekly at Dagorà’s headquarters in Manno (Lugano). With expert guest speakers from primary companies, these meetings offer attendees a chance to connect with potential business partners and stay abreast the latest trends at the crossroads of lifestyle and tech.

Let’s review some of the main trends in today’s real estate industry.

1) Inflation& recession: “Inflation will affect every aspect of the real estate sector” Pwc reasons. According to the consulting firm, 2022 saw a surge in material, building and energy costs. And that’s not all. “There is a widespread belief that a recession will lead to occupancies and rents falling, even in previously robust sectors”. Data suggests that residential real estate represents a more robust market than commercial real estate. Why? Because it’s considered a more stable income source for property owners.

2) Interest rates: After a decade of plentiful liquidity in the real estate capital market, galloping inflation finally forced central banks to raise rates. We’re entering a new era, although we’re nowhere near the obscure outlook seen in the Big Crisis of 2008.

4) Proptech: is the joining of real estate, technology and platform economy. Typically, proptech improves efficiency and overlaps with fintech, construction technology (contech) and others. According to the PropTech Global Trends 2022 issued by Extended Monaco, the program in charge of the digital transformation of the Monaco Principality, as of March 2022 there were 2,209 companies operating in proptech around the world, comprising 67 countries, 4,463 investors and 20,41 billions raised. Proptech is relevant not only in the traditionally high-value markets of New York, London and Paris, but also in smaller markets throughout the world. One example is Citypop, a Swiss company based in Lugano, one of the country’s financial hubs. “Thanks to the digitalisation and to new partnership models, the real estate sector is evolving towards ecosystems models addressing holistically the users’ needs”, Matteo Bernardoni, head of digital marketplace and platforms at UBS says. “Coopetition is therefore the key to create seamless client experiences and provide to the users the right products at the right time and in the right place”.

5) Automation is becoming the norm: with the diffusion and increasing power of Crm, real estate agents can shift their attention from “monkey work” to more crucial tasks such as building brand awareness and negotiations.

6) E-signing is now commonly accepted: fueled by the pandemic, the practice of e-signing real estate agreements has become quite common, especially for foreign sales. In many instances, in-person signatures may be highly inconvenient, due to staff reductions and travel bans. E-signing is both flexible and secure, thanks to the quality and availability of platforms such as Google Drive and Dropbox: the latter recently acquired the San Francisco startup Hellosign (which has now become Dropbox Sign), in an affort to get in this new business.

7) Virtual reality is here: VR is permeating various aspects of real estate. One good example is 3D tours, which allows agents to show properties to a wider number of carefully targeted potential customers, 24/7. In the near future, access to in-person tours could be limited to clients who express strong interest in a given property.

8) Big Data and AI are gaining more power: new tools allow real estate agents to analyze entire markets within minutes. This used to take several weeks, if not months. Powerful, intuitive tools can analyze various socio-economic dimensions, and identify new niches and trends.

9) Digital twins: a digital twin is a digitized copy of a building or even an entire city, completely virtual but still to scale. It allows users to better study structures, and also to preemptively assess policies and their implications. This technology is currently being used in the Ukrainian city of Mykolaiv, on of the most affected by the war. Even with the conflict still ongoing, drones allow the municipality to map out digital twins of all of Mykolaiv’s buildings, and thereby design a masterplan for reconstruction. All data is stored in the cloud. “And there, it can’t be destroyed by bombs”, the mayor says.

10) Metaverse: believe it or not, we are already hearing about property investments in the so-called metaverse: companies are buying, selling and renting buildings in virtual squares just as we do in the most valuable main streets of the world, like Fifth Avenue in New York, Bond street in London or via Monte Napoleone in Milan. This is no joke, but a matter of millions. Common sense tells us that nobody can predict the future: in the early 2000’s, Second Life, a similar project, was completely forgotten in a couple of years; more recently Meta, that even changed its company name in order to embrace the new potential market, is firing thousands of employees. But, nevertheless, it still might be a good idea to keep an eye on the evolution of this virtual business.