Data is crucial for residential developers in order to maximize their sales and profit and it’s extremely important to know where to find and how to use the right dada. Sergii Stoliarchuk, CEO of proptech company Maxify, which offers a dynamic pricing management system for residential developers, talked to Property Forum about the role of technology in residential development.
Do you see residential developers in the CEE region taking advantage of the technology already available to them?
Definitely yes. All active market players are moving toward digitalization. Sometimes it is a deliberate decision and sometimes market conditions force companies to integrate digital solutions. According to McKinsey, COVID has accelerated the digitization of customer interaction by three years and overall digital transformation by seven years across Europe. I see that digitalization within European companies is led by CEOs or in-house, innovation-savvy executives no matter what specific position they have – chief innovation officers, chief marketing officers, commercial directors, or business development directors.
If the key driver of digitalization is COVID-19, then we see that developers integrate digital tools more situationally to overcome new challenges caused by the pandemic. According to the KPMG’s real estate innovations overview, 43% of new technologies are implemented in property and facility management and 18% for leasing, sales, and transactions. These two sectors are leaders in real estate in terms of digital transformation. When sales managers and potential buyers are limited in live face-to-face meetings, then online property tours and interaction with customers through digital channels are the ones to help in sales. As a result, companies manage to keep the pace of sales and avoid a drop in market share.
Among such technologies are online catalogs, 3D visualizations, chatbots, and their combination. Sometimes it is services that help to choose the design and fit-out (furniture, decoration, materials, color, etc) of the future apartments. For clients, it is an easy story as all these services are available right on the developer’s webpage. For developers, it is a decision to accept the new rules of play and undergo the transformation as fast as possible.
Another area of digital improvements is to make the full process of transactions online with no need to come to the sales office. There are a few companies in Poland that have achieved this: they digitized almost the entire purchase process, except for the notary certification of the deal.
As proptech is gaining ground, are developers becoming more conscious of the importance of data and what data can do for them?
We often hear from developers that they lack data. At the same time, they use last century methods to collect them – regular tours to sales offices of the competitors, phone calls, etc. But nowadays companies can and should save their resources and energy to collect data with digital means.
Data on competition is one of the most desired as of now – how competitors manage prices and what assortment they have. Developers believe that understanding the competitors’ available assortment allows companies to anticipate and meet demand; manage prices accordingly. They are right to some extent. The case is that profit maximization is possible when the developer focuses on the assortment, demand, and consumer behavior within its specific project and less relies on the competition environment. Our research of consumer behavior across Europe shows that often potential buyers made decisions on purchasing a specific apartment out of the market context. We had a case when prices based on general market analysis were lower than prices which we manage dynamically based on the demand during sales. Thus, Maxify helps developers to fulfill the potential of every single project and apartment.
Usually, developers have fragmented data – they can have data on the availability of units and lack prices on them. There are also data aggregators for this purpose. But this data should be double-checked before using.
New technologies which will help to solve the problem are on their way. But now they have geographic limitations. To launch a tool that will be able to accumulate data across several markets is quite a complicated and time-consuming process. Today there are solutions separately for Western and Eastern Europe.
What are the main challenges developers face when trying to set the right price for apartments?
According to the Knight Frank Global House Price Index, price growth is 7-30% year-on-year, depending on the region. For a long time, demand for new apartments was higher than supply. As a result, the developers sold out the best part of the buildings very fast. Stakeholders were satisfied with the result as they had stable cash flow.
Today, before launching the new project, the developer has to consider new challenges – growing construction costs, inflation, prices growth slowing down, the disproportion between demand and supply, as well as timing and number of projects in the pipeline. The solution we see is to dynamically interconnect construction plans and costs, revenue plans, and pricing during the whole project life cycle. These steps will allow developers to avoid fast sales at the beginning of the construction, to keep the assortment healthy and the margin at the highest possible level.
From which markets are your clients coming from at the moment? Where do you see the largest potential for further growth?
Our product is applicable on any market for any residential project to sell, no matter the number of apartments or phases. As of now, we have representative offices in Warsaw, another is about to come in London, the R&D office of the company is based in Kyiv.
We started an expansion from Central and Eastern Europe, where we now can provide our customers with 24/7 multi-language service support. The further steps for the company are to expand to the US and Middle East markets, which, of course, require more time.
How do you see the role of artificial intelligence in the decision-making process of residential developers going forward?
Artificial intelligence is an excellent tool to work with big data. It provides companies with the opportunity to select the necessary option with foreseeable results. The role of AI will keep growing across all areas including real estate. It will save time, make fast well-calculated decisions to help developers and all market players focus on the quality of the projects, services, and day-to-day life. While AI does its work, people should focus on what AI still can’t manage to do – develop creative industries, wow services, and experience economy.