Proptech’s promise: how technology is changing the property industry
For decades, the property industry has been labour intensive. Data on property is not always easily available; some processes, such as obtaining planning permission or performing a simple conveyance, are unnecessarily complicated and time consuming. Where high demand for property clashes with low supply, the result is a perceived low level of customer service across an industry where the product is king.
However, the technological advances being made in other areas of our life are driving the need for the property industry to improve customer service and their product, in order to catch up with other industries. Where property and technology meet, we get proptech.
Proptech firms are appearing at an increasing rate. They provide technological solutions across the commercial and residential property sectors, including:
- Construction and development
- Interior fit-out
- Selling and purchasing
- Property rental
- Asset management
Proptech’s aim is to increase the speed of developments and transactions and enhance customer experience. Last year, Property Week reported that in 2017, funding for proptech firms increased by 62% to £8.5bn. That growth has continued into 2019.
How is proptech making a difference?
Here are just some examples of ways in which technological advances can be used in the property industry:
- Offsite construction of buildings, which is often quicker and cheaper than traditional methods
- Document reading software to make planning and design and due diligence quicker
- Storing information on property – e.g. planning, tenancy details, historical valuations – and making it publicly available to help speed up conveyancing transactions and planning applications
- Software to manage maintenance issues: logging calls, authorising maintenance, track faults, communicating with smart devices in buildings about faults etc
- Tenant scoring systems to replace deposits
- Being pre-approved for mortgages or levels of rental, thanks to the availability of financial data
- Tracking energy costs across a building portfolio
All of these save time, improving customer service and lowering costs. Like other industry specific technology, proptech should also have the advantage of ‘scalability’ over having to employ more people as operations increase in size, which would reduce costs even further.
What’s the price of proptech?
All of this may sound as though proptech could be expensive to implement. But with more cloud based solutions being available, and the increase in competition across the market to provide these technological solutions, the costs are being kept lower than you may think.
Importantly, the costs of implementing this new technology are tax deductible, as they are incurred wholly and exclusively for the purpose of your business.
If you decide to improve your technological platform in-house by developing new products, processes or services, or enhancing existing ones, there may be research and development (R&D) tax credits available for the costs incurred. We have more information on our R&D page.
All new technology included in the construction or fit-out of a building will attract capital allowances. These can be deducted against profits of a business for owners who are using the building within their business (i.e. for the purpose of its trade) or renting out the building as a property investor.
Alternatively, you may be looking to set up or invest in a new proptech business yourself. The Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) may be available to individuals on their investment, which can offer 30% or 50% tax relief respectively based on the cost of investment. Any disposal of the shares in the business will be capital gains tax free, but there are criteria to meet and pitfalls to avoid in the legislation. We have further details about the quirks of EIS and SEIS.
To find out more about how we can help proptech businesses, please get in touch using our enquiry form.