What are the opportunities and challenges Australian proptechs face over the next 12 to 18 months?
Proptech Australia President Kylie Davis sets the scene for our second Proptech Forum.
Peter Schravemade
So, journalist, mother, mentor, colleague, traveler, proptech owner and a dear friend of mine is this lady, Kylie Davis.
Peter Schravemade
There is no one that brings me more challenges so I think she is well and truly qualified to talk about what are the challenges and opportunities Australian proptechs face over the next twelve to 18 months. Please welcome our president, Kylie Davis.
Kylie Davis
Thank you. Am I on? Yes. Good, you can all hear me? Excellent. So I just wanted to thank Brother Tom for that amazing welcome. I heard Shantelle Thompson talk at the Rise conference recently and she made a couple of comments that really resonated with me. In proptech, Shantelle said that in First nations thinking, we all have a purpose. In Western thinking, our purpose is a North Star that sits outside us, but in First Nation thinking, it is inside you and is actually about getting rid of the noise in your head to connect you back to purpose. And I thought that was a really beautiful sentiment. I also loved the idea of that if you dream it and you can create it.
Kylie Davis
And a couple of years ago, Lara and I were dreaming of bringing a community together in proptech and creating an association or a network of people to start to deal with the challenges that we have as an industry. So thank you for being part of my dreaming. Now, let's have a quick I like to start off with some data. Let's start off with the state of the industries that we're serving to look at what some of the challenges are that we're facing. We are a ten residential property as Australia's favorite asset class, $10 trillion according to the most recent CoreLogic figures. Now, depending which data provider you believe, we have between eleven and 12 million residential homes sitting in our markets now. But we still have a 175,000 shortfall in the number of homes that are needed by 2027.
Kylie Davis
And a couple of years ago, Lara and I were dreaming of bringing a community together in proptech and creating an association or a network of people to start to deal with the challenges that we have as an industry. So thank you for being part of my dreaming. Now, let's have a quick I like to start off with some data. Let's start off with the state of the industries that we're serving to look at what some of the challenges are that we're facing. We are a ten residential property as Australia's favorite asset class, $10 trillion according to the most recent corelogic figures. Now, depending which data provider you believe, we have between eleven and 12 million residential homes sitting in our markets now. But we still have a 175,000 shortfall in the number of homes that are needed by 2027.
Kylie Davis
And this year, in the last twelve months, there were 1700 builder insolvencies around the country up until April 2023. So something's going on. We also produce 76 million tons of waste annually from construction. So the ways that we build these properties, which we can't build enough of, is highly wasteful. And 13%, according to Deacon University, 13% of the cost of a building is spent in time on rework, whether that is just going through plans or having to rebuild or fix things, we are constantly in a state of needing to. A significant proportion of the end cost comes because we are not efficient in how we organize and plan things. And only 3% of the homes that we build are prefabricated. The entire logistics industry that runs our transport, our supply, seems to have completely bypassed the construction industry.
Kylie Davis
And I'm not having a go at construction, but I'm just basically using this as an example that there are means and models out there to do things better. But we're sticking to blokes churning up with bricks. And we have 175,000 shortfall. And here are some of the. And trigger warning. Apologies. Hope Sarah Bell's not here. I'll get into trouble. I should have trigger ward you first. In the real estate industry, 13 out of 100,000 people suicide each year because of the stress and pressure. A lot of that related to work. It's even worse in construction. 26.6 per 100,000. These are awful numbers. And so into this space of crisis of basically, we're not building enough homes, we're not building them quickly enough. It's our favorite asset class. We're hungry for it.
Kylie Davis
We all know from COVID especially how important home is, how important it is to feel safe. This is a deeply psychological state that home triggers in us. We are about to jam into that space a whole lot of new activity that is going to also impact this part of the industry. We have committed as a country to net zero by 2050. That was the past government where there's now action to try and make that even faster. 78% of our existing housing stock. Of those eleven to 12 million properties that are already in the market are only two out of seven stars. There is a. I think the official word is shit ton of work to bring them up to compliance. 24% of our electricity use is from residential homes. 10% of the carbon emissions are created by residential buildings.
Kylie Davis
And we are working to get 100% of our properties electrified by about 20. Is it 2030? Something like that. But by 2027, just a few years away, we want to have more than half of them electrified at the same time. The money, because of the federal government commitments, and we are working industries that are small cottage industries based on local and state legislation, but at a top level. Coming down the pipe are changes in the banking and the insurance industry that are adding additional pressure onto this in a good way, because you follow the money and stuff happens, right? So we are seeing that banks and insurers are by law starting to assess the climate risk in their portfolios, which is adding to this driver of why we need to start to update our residential properties.
Kylie Davis
And what we're seeing and what we're moving into is a period of parrot and stick. Homeowners are going to be incentivized to do work that brings their property up to the new code. They are going to start to, shortly after that, feel a lot of pain in additional costs if they decide not to, as are landlords. We're going to start to really be pressured. But we have, as we saw, a construction industry that cannot cope with the on the Gold coast at the moment. One of the reasons why Isaac and the property and the proptech B E team couldn't be here is they're up at the API conference on the Goldie. The valuers are now all starting.
Kylie Davis
We are moving into an era where valuations will be determined by energy efficiency as well as the number of bedrooms, the number of garages, bathrooms, and whether you've got mealer appliances or not in your kitchen. This is going to become even more important as part of our valuation models. So we are about to face a supply crisis. Not just green prop tech, but how we build, manage and the way that we assess value. There are big changes coming down the pipe in the next five years. We are going to start to see them very soon. Well, they're coming right now. Now, Einstein said that the definition of his insanity is to do the same thing over and over again and to expect a different result.
Kylie Davis
And the place that we're in right at the moment in expecting our current system to deal with the future challenges is kind of crazy. And so that's okay. That's not an accusation. It's just something that we actually need to own to say, okay, something needs to change and we need to lean into that change. So why is adoption so challenging? Well, I don't know if you've seen the awesome proptech wall out the front. I hope everyone gets their photo done, like with their fingers pointing at their own proptech. But we have more than 480 proptech on that wall at the moment and that kind of feels overwhelming. If you're a real estate agent or a property owner, where on earth do you start? How do you assess 480 prop techs? Well, I would encourage you not to try and do it that way.
Kylie Davis
We can talk about it, but all of the real estate businesses and property owner businesses and construction companies that we see out there, the big challenges are, is that there is almost so much choice that how do you work out what the ideal stack is? We're trying to let people make their own choices in the same way that we let people customize and bespoke their building that they want to build, when most people would quite happily just pick something off the rack. We give people endless choice, which just paralyzes us, often with fear. It's cost too. Adoption is challenging because of the cost of it. And it's often not the cost of what you're asking them to pay as a SaaS subscription. It's the cost in their head about how long is it going to take to adopt this?
Kylie Davis
How many people are going to stop doing their BAU work while we train them up? How long is it going to take us to make this feel normal and comfortable? And so how long is that time thing, the time poverty around it going to affect us? And here's one of the things that I think where we really need to lean into it, and this is the point of the presentation today, is that we need to watch our own language and we need to start to reflect on how we are selling our prop tech. And in fact, I'd like to just also query the word sell. We need to stop talking in features, we need to stop talking in shiny buttons. We need to stop talking in this whole future stuff. We actually need to start to talk about the benefits.
Kylie Davis
And not just generic benefits. Oh, it'll save you time and money, actually. We need to bring them down to real pain points that our customers are feeling and show how we fix that pain. And we need to talk about the value of what we are bringing to the conversation and their workloads, not just the dollar price sitting on the tag of it. And here's one of the other things that I learned this year as part of my rise work and proptech work started to come together. Our brains are hardwired risk mitigation engines. Our brains are hardwired to keep us safe, but our brains do not. But we define safety as what feels familiar, not necessarily what is actually logically safe. We go back to places in our psyche that often feel safe.
Kylie Davis
And so safety often feels like, yes, I know if I introduce this prop tech, I could save XYZ dollars a year and I could cut everybody's time back on the work that they don't want to do. But I know how to do this way. And so I feel safe in doing it. So I don't want to change. We're seeing that. We're seeing customers sort of basically making choices that they feel safe, not logical. So we need to start actually talking in language that will make people feel safe. We've got our own stuff going on, right? This is all very well, Kylie Davis, to talk and lecture us about how we need to do our thing, but there's a lot less money out there for us to do it. So we are under pressure.
Kylie Davis
As prop tech founders, you're under pressure if you're looking for funding, but you're also under pressure if you're bootstrapping and you've got transaction levels based on market activity. With less market activity, this gets harder. And as founders, we're also all under cost of living pressure. It's really hard to convince your spouse that this prop tech dream that you've got is awesome and that he or she should keep working. Basically, when your mortgage has gone up by three or four, couple of points, that's hard. They are hard human conversations to have either the breakfast table lying next to each other in bed. I hear a lot of this stress going on in the industry. And here's the other thing I know also too, from conversations with a lot of you in the room, that integration cues for us to connect up to each other's technology.
Kylie Davis
Those have never been longer. It's really hard to work out priorities when everybody wants to integrate with everyone else's work. There is work involved on both sides. You could spend your whole day just devbing integration stuff as opposed to working your own roadmap. And it's hard to find and keep great team members, especially when they're under cost of living pressures too, and struggling with the dream. And we've all been running since COVID like since COVID hit, we have all basically been leaning in so hard and trying to help our clients so hard. And I hear from a lot of you that you're tired and we need to manage our own energy. But we're no longer in chartered territory. And this is how I see us coming through all of this.
Kylie Davis
Now I'm going to put up some dots, but at the laggards at one end, I wanted us to see that the laggards are not laggards, as in, we've been using the technology for ages. This is simple, right? Why wouldn't we do it any other way? As opposed to innovators that think, oh, we just discovered we could do something new, maybe we should explore it. Residential sales has been on this journey for more than 20 years. So the majority of residential real estate agents are pretty much in the late majority. They've all got active CRMs. They're no longer using Rolodexes. They're starting to adopt technology that is integrating with those CRMs we're seeing. So residential real estate is a great model for commercial real estate and for construction to see what the curve and the adoption looks like.
Kylie Davis
Residential property management, I think also early majority, from the last MRI survey in the space, the majority of property managers had updated their tech to cloud based tech in the last couple of years. Commercial sales, I'm going to put them into that early adopter stage. They know the tech's out there, they're starting to come on board with it, but they haven't quite embraced it into every element of their thing. And look, this is Kylie Davis. I reckon it's not. There's no science behind this, it's just conversations and anecdotes. Property owners, so the big end of town. And Suzette, I'm looking forward to your session. But the property owner end of town also just starting to discover that there's stuff out there that they know there's stuff out there and they're on the beginning of that journey.
Kylie Davis
And the same with facilities managers, but developers and builders still very much in a. Oh, yeah, but you know what, I just like email. Just like email. So great. But here's where our B to C sits. My eldest son has just bought his first unit. He's in that state. Offer has been accepted. Conveyancer is engaged. Reports, it happened very quickly. Reports haven't quite happened in the right order, but he's in that chaos stage between, had a pre approval, has got the loan, but that now needs to be confirmed, all of that sort of stuff. And I had to say to him, sweetheart, you have to phone the conveyancer, pick up the telephone and phone the number and talk to her, and then you'll have to go visit her. And he was like, why?
Kylie Davis
I said, sweetheart, it's old school, you just need to embrace it. And so this whole idea that they cannot understand why we still hang on to these ways of doing it, and in fact, we hang on to that. We as consumers are working with technology in ways that when we go into our legacy businesses, why is this still a thing? Because it makes people feel safe doing it that way. Makes them feel safe. So here's what the takeout is, that tech adoption follows really common human patterns of behavior. It doesn't care what industry silo you're in, it doesn't care what state you're in. It doesn't care what the state legislation says or whether you're obliged to follow federal or whatever, legislate. These are human conditions that technology is a tool to fix. And we've passed the big data tipping point, right?
Kylie Davis
We know this now. We have so much data sitting behind everything that we do now. It might be in a pile in a shared drive somewhere in your business, but we have, as a society, completely passed that middle ground. Everything changed in November with the launch of chat GPT, because suddenly now the entire world that we live in has a model that works, that we can understand, that big data plus AI plus natural language, not needing to code anymore, but actually just being able to ask for what we want to use our words actually is this is how tech is going to work for us. We're on the tipping point now of society understanding that up until this point, humans have been the slaves to the machine to make the machine do what it wanted to do.
Kylie Davis
It needed little humans to run around and either move the floppy disk or move the things from the shared drive into it. We've been doing all the things to make the machines work, but where we're moving into is a space where the machines start to work for us. And we need to be using tech as the tools that we use, not as defining it as who we are. So how do we respond? Well, we actually need to be more human. We need to stop seeing ourselves as tech companies and see ourselves as solution companies that solve through tech.
Kylie Davis
We need to identify the pain and the cost of the status quo, not just talk in motherhood statements about we will save you time and money, start to drill down into your tech and work out exactly how much time and money you can save by comparing it to existing processes. Some of you do this, but some of you need to really go harder at it. We need to make our clients feel safe. Our tech needs to feel like a nudge from what we're going to. There is a whole lot of reading around economic theory, around nudge techniques. We need to be nudging our clients to do just one more thing, one little thing to get them towards the next step, to embrace the next feature, rather than making it feel like a big jump across the chasm.
Kylie Davis
And we need to start really excelling around change management and not seeing it as change management, but almost nudge management. How do we get people to just do that next thing? We need to normalize, guide our clients through and normalize different learning stages. Let people know that as they're going through this thing. They're not alone. You're not the first person to ask that question, not the first person to have these concerns. Let's reassure you about how this works. Give people a roadmap. We really need to run better businesses for our own sake as well as for our client's sake. We need to start to challenge this model of burnout or bust as startups. I want you all to start to look after your own mental health and give yourself a break at time off.
Kylie Davis
Give yourself some time off with your spouse so that when you do point out to her that your startup salary, she's going to have a little bit more in the tank. He or she's going to have more in the tank. We need to start to collaborate and sharing and working across silos. We need better conversations between residential sales prop techs and commercial sales proptechs. We need to see that we're solving similar problems, that just the execution is slightly different. To work for the business model, we need to join the dots and remove barriers and the seamless to create seamless integrations. And we need to support and drive industry standards. So what can we do?
Kylie Davis
The amazing thing as an industry association that we offer everybody in the room is there are some things that need to be done to make life easier for our clients and to make life easier for us. That if a single business in our industry pushed for it would feel like a commercial grab. But when we operate as an industry association, it becomes to the benefit of all. So there are times as an industry association when we can work towards outcomes that benefit everybody, make the pie bigger that we need to actually lean into, and we would love your support and ideas around that. And so this is how we all need to think bigger together. And I'm really excited. That was theme of the conference this year and I wanted to thank you all for coming along and hope you have an awesome day.
