How digitalization is decoding demand for real estate
Digitalization is making it possible to gather and evaluate key information more easily, thus enabling demand for real estate to be analyzed better. The 2021 Credit Suisse real estate study shows which trends in the housing market are emerging from this.
Impact of the COVID-19 crisis quickly visible through digitalization
The COVID-19 pandemic has shown how important it is to be able to use data as quickly as possible as a basis for assessing the situation in the real estate market. Fortunately, current information processing options enable data on demand to be compiled quickly. For example, the Swiss proptech company Realmatch360 analyzes search registrations on the largest Swiss online portals in anonymized form every week, and promptly provides its customers with the data.
Thanks to the valuable analysis of the search profiles, it is possible to use actual data to say whether the COVID-19 crisis has changed demand for housing, and in what way. It shows, for example, that owner-occupied apartments and single family dwellings are increasingly in demand, and rental apartments less frequently. Within the segments, people are increasingly looking for medium-sized and large apartments. This shows that people's aspirations as regards their own living situation have risen.
No shift away from urban centers in the demand for real estate
Since the outbreak of the pandemic, house hunters have also been more interested in less central municipalities. However, there is no sign of a shift away from the urban centers because the appeal of central locations has grown strongly in recent years. That is why many people looking for a new home still want a rental apartment in the cities.
By contrast, the shift to less central regions is more evident in the case of owner-occupied property. The reasons for this include the high prices of real estate in central locations and the increased opportunities for working from home.
However, it will only become clear in the coming years how lasting these trends are. That is why it is important to track demand continuously and not to draw false conclusions from a snapshot.
Ascertaining the optimum rent in the housing market
In addition to demand preferences, search registrations also provide local information about what residential property hunters are prepared to pay. As a few francs more or less per square meter in annual rent already determine how easy or difficult it is to rent out a property, accurate information is essential for owners, property developers, marketers or brokers.
If additional information on the marketed property is provided, such as the age, condition, area, location, and fitout/features, the optimum rent can also be ascertained using modern web apps.
Gaps can be filled thanks to digitalization
In summary, it is clear that the digital analysis of demand behavior – alongside supply and market data – can also help to close knowledge gaps in project planning and marketing. This is a big step forward, especially as it is increasingly important to find out more about demand behavior in the office and retail market given the growing challenges in these markets.
"Searching in the housing market has become simpler and more efficient"
Thomas Rieder, a real estate expert at Credit Suisse and co-author of the 2021 real estate study, talks about increasing digitalization in the Swiss real estate market in this interview.
Mr. Rieder, several parts of the 2021 real estate study shed light on different aspects of digitalization in the real estate sector. How are tenants and homeowners affected by this?
Thomas Rieder: Nowadays, it starts when you're looking for somewhere to live. Twenty years ago, advertisements for apartments were almost only to be found in newspapers. Today, by contrast, real estate is primarily advertised through the major online portals.
In recent years, digitalization has brought further changes for tenants and owners: For example, mortgages can be taken out online and people communicate with the operating company via an app.
What has this changed for house hunters?
Finding somewhere to live has become easier and more efficient. People can look for suitable apartments much more effectively. And thanks to the option to register your searches as a subscriber, you are quickly and easily informed about suitable new properties. If you're interested in a specific property, it's possible in some cases to do a virtual tour, which also shortens the decision-making process.
Are there any disadvantages?
In analog days, it was possible to snap up a bargain owing to the limited reach of advertising. If a cheap property is advertised these days, a large number of house hunters find out in no time at all. This increases competition and doesn't make finding somewhere to live any easier despite information being available more quickly.
Huge amounts of data are generated on online real estate portals. What can be learned from this data?
Owing to advances in data analysis, the data available on online platforms can quickly be analyzed. This makes it possible to gain valuable insights into the regional market situation. Thanks to this data, we were able to find out very quickly what effect the COVID-19 crisis is having on demand for rental accommodation and residential properties.
In the study, you also had a look at the topic of the Internet of Things (IoT) as regards office buildings. Is there anything comparable in the residential area?
Yes, especially in modern apartments IoT is increasingly being used to make an apartment more intelligent. This covers everything from operating the blinds and heating to lighting, alarms, and the locking system. Robot vacuum cleaners and lawnmowers that work automatically are found in more and more households.
Moreover, IoT in urban development is the basis for smart cities. Example applications here include intelligent parking systems, smart energy metering systems, or monitoring air quality and water levels outdoors.
What further developments should we expect to see in terms of digitalization in the real estate sector in the future?
We expect to see a sharp increase in the use of existing innovative products and processes in the coming years. Our homes will be even more closely connected digitally. But in construction too, the influence of digitalization will increase a lot. More and more often, for example, institutional investors already require the planning and construction process to be digitalized using building information modeling (BIM) in requests for proposal for construction projects.
Digitalization is also growing in importance in the financing of real estate because this makes a bank's internal processes faster and more efficient. And an existing mortgage can quickly and easily be extended these days via online banking. Despite this, first-time buyers frequently still want a personal consultation when financing residential property.