Real estate reaches the 21st century with the 'proptech' boom

The Covid-19 pandemic and the sudden restriction of movement increased people's interest in their own homes and how they use space, especially in Korea where for decades the home has been a place to sleep, maybe eat, and little more.

The Covid-19 pandemic has affected everybody's lives in different ways, but one thing is almost universally true: We all spent a lot more time at home in 2020.

That sudden restriction of movement increased people's interest in their own homes and how they use space, especially in Korea where for decades the home has been a place to sleep, maybe eat, and little more.

With offices closed, a score of companies ventured into the realm of telecommuting or renting out spaces in shared offices. Looking for new housing was an issue as face-to-face interactions, with real estate agencies or current tenants, were not considered safe. Home interior and decor quickly rose as one of the best-selling product categories on e-commerce websites.

Amid such circumstances, Korea’s “proptech” enjoyed a strong year in 2020. Short for property technology, the portmanteau refers to services that use information technology in property-related fields, like real estate or building management.

“Digitization has created fast and diverse changes in many other industries — but real estate was relatively slow in adopting this trend,” said Ahn Sung-woo, chairman of the Korea Proptech Forum, an organization that represents more than 200 domestic companies.

“To this day, the local real estate market is based on offline activities. Digitization has just started for us, so it’s a very important time to really push that growth.”

Screencapture of mobile app Zig Bang, which offers real estate information. [SCREENCAPTURE]

Ahn himself is the CEO and founder of Zig Bang, a real estate app that provides property information including prices and detailed visuals of homes using virtual reality (VR). Launched in 2012, it has been the best-known IT company in the field of online real estate for years. The service saw its mobile app traffic double in 2020 compared to 2019.

Last year set a new record for seven-year-old Ohouse, or Today's House in Korean, as well. Its mobile app and website is like an online gallery of users that upload photos of their home interior, complete with links to the furniture and decor used, which can often be directly purchased through the platform.

On top of boosting demand for home interior, the company’s annual revenue doubled on year in 2020 to surpass 70 billion won ($63.4 million). In November, it received its largest investment, at 77 billion won.

At Urbanbase, which offers 3-D virtual maps to simulate furniture placement, traffic increased fivefold on year in 2020. The number of subscribers of its paid 3-D interior service, which offers maps and estimates of construction costs increased 177 percent on year.

Screencapture of Ohouse, or Today's House in Korean, where users upload photos of their home interior, complete with links to the furniture and decor used.. [SCREENCAPTURE]

“The adoption of ‘untact’ measures became a must for all industries in the Covid-19 pandemic,” said Urbanbase CEO Ha Jin-woo. “Furniture and interior construction, in particular, are very high-involvement products [where prices are high and consumers go through a thorough decision-making process]. Our performance was the outcome of these two factors combined.”

Last year alone, the Korea Proptech Forum’s members raised 178.3 billion won in investments. Total funding may be even higher, considering the count was restricted to deals disclosed to the public.

The 2020 figure was much smaller than 596.5 billion won in 2019, when funding first jumped up, but still marks an increase from 2018’s 167.6 billion won — which is notable considering start-ups were generally affected by Covid-19 last year as a score of investment decisions were postponed.

“There was a slow-down of investments in the first half of 2020 due to effects from the coronavirus, but the situation improved in the second quarter as investors started making funding decisions,” said Cho In-hye, secretary general of the Korea Proptech Forum.

The organization’s study shows that Korea’s proptech ecosystem is showing signs of growth — both in terms of size and the range of industries companies are engaged in.

In November 2018, it started out with 26 member firms. That figure constantly grew to hit 230 by December last year. According to Cho, the forum’s early members were confined to real estate information providers. Today, its members span from providers of property management software, virtual and augmented reality technology, shared services and urbanization solution providers.

“One aspect of proptech is that it can offer answers to old problems that remained unsolved in the offline realm,” said Ahn. “For example, the reluctance to visit model houses amid the pandemic put a spotlight on technologies like 3-D mapping and VR technology.

“There are definitely realms that we can work together with traditional players. [Proptech] should not be viewed as something that creates a wall between the old and new, but a tool that can combine methods from both generations.”

BY SONG KYOUNG-SON, PARK JEONG-SIK [song.kyoungson@joongang.co.kr]