Property Hub - Investment Insights & Inspiration - Realty Talk: AI Will Transform Property Transactions

Episode Date: October 27, 2023

There is a lot of talk about AI - Artificial Intelligence.  The way we buy and sell real estate has not changed in almost 40 years - since the internet impacted the process. AI will change that!  Kylie Davis is a leading authority on the Australian proptech landscape and the founder and president of the Proptech Association of Australia.  Property is a massive, fragmented industry overdue for an upgrade.  Make no mistake - the real estate industry will be affected by AI.  So too, will buyers and sellers.  One of our sponsors - Realty.com.au this week launched AI powered Discovery Search which will change how we find the home we are looking for.  We will tell you more about Realty’s Discovery Search next week. NEW - join our Facebook group, The Property Hub Collective: https://www.facebook.com/groups/1857513011165686  Join the Property Hub community on Substack! Sign up to get Australian property news, opinion, and episodes in your inbox: https://propertyhubau.substack.com/ Subscribe to RealtyTalk on the Property Hub channel: Apple Podcasts | Spotify | Google Podcasts | Email Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media. Business and partnership enquiries: [e-mail] omnystudio.com/listener for privacy information.

Well, once again, welcome to the show. The way we buy and sell real estate hasn't really changed in almost 40 years since the internet impacted the process. AI will change all of that. We need better understanding around this stuff to humanize the technology, to make people understand or help people understand that this isn't about either or. This is about human and tech working together to create amazing experiences in real estate. Hello, I'm Kevin Turner and on behalf of our content partners, Realty.com.au, BMT, Tax

Depreciation, Know How Property Finance, Get Rare Property and Apiro Marketing, welcome to this week's Realty Talk Show. That little insert you heard was Kylie Davis. Kylie is a leading authority on the Australian prop tech landscape and she's the founder and president of the prop tech association of australia make no mistake the real estate industry will be affected by ai and there'll be those who embrace technology now and make it happen versus those who ignore it and they're likely going to end up being drowned in the wake property is a massive fragmented industry overdue for an upgrade one of our sponsors

realty.com.au this week launched ai powered discovery search ex-ceo of the rea group realestate.com.au simon baker summed up what discovery search is when he told daniel streak recently in our sister show realty uncut we have to move from matching to discovery now this is where ai starts to step in traditionally it's been reliant on me as the searcher to really guide the process that's really then limited if i don't know what i don't know i'll never find it so then the role of an ai driven search engine is to say what's really important to you tell me where i could live try doing that today on rea or try doing that today on domain you can't right so that's the next evolution that then starts to bring in more characteristics about what's important to

you simon baker there and we'll tell you more about realty's discovery search in the show next week don't miss that in the meantime kylie will join bushy in just a moment to discuss how the industry that's the real estate industry is shaping up and how ai will impact the buying and selling process hey if this is your first time with us welcome you're going to find us on all podcast players and through the southern cross of stereo network if you like the show make sure you hit the subscribe button and help us continue to bring you the best guests every week We'll be back in just a moment as Bushy kicks off this week's show. deductions call bmt on 1-300-728-726 today for an obligation free quote

realty talk and your host bushy martin okay here's bushy with this week's guest kylie davis so welcome to the property hub kylie thanks bushy thanks for having me i'm really looking forward to the the chat because uh you're really at the forefront of uh an area that's going to really transform and disrupt what's happening in the good old world of property so to sort of get straight into the heart of this quite transformational subject what are the technological and behavioral trends that you're seeing that are changing how real estate is being practiced right now yeah so i think i think one of the things to comment on is that this is we are in the middle of this this is not coming this is this is something that we're now living every single day

right and and it's been coming for a while and some of the trends i'm going to mention people are probably going to roll their eyes and go oh what still is that a thing but what we're seeing is that we are now at tipping point around this whole idea of big data everywhere we go everything we do every breath we take every step we take is being recorded and monitored on our phones on our on our you know on our computers like on our fitbits and you know google watches or apple watches everything is we create a data stream everywhere we go and and with everything we do across all of our lives not just for property and property has always been an industry that has had an awful lot of data around you know property size and you know housing type and location and

suburb value and all of that sort of stuff but when you overlay that information that we have about our market and about the asset class of you know residential property especially in australia and then you start to overlay that with the data that is now coming out about the people in those properties because of the devices that we're carrying and the and the coverage of it it starts to give us this extraordinary power source to drive ai and in the meantime you know the other big trend is that chat gpt has has come out now ai has been around for a really long time we've been looking at automatons since you know since greek philosophy you know since the greek day some homer I think, first wrote about automatons.

But what we know is ChatGPT is basically the post child for making AI accessible to everybody. Like we can all understand how it works. We can start to play and practice with it. And in doing that, it breaks down a lot of those last barriers that we've had to embracing it and then looking at ways that we can adopt it inside our businesses. But AI can only work with really good data.

And so real estate is one of those areas that has quite astonishing data that we're able to that as this technology um grows is is coming into us but is coming into our space and becoming normalized at the backdrop of that is the human behavior so if you think about how we order a cab or a pizza or um or you know what our expectations are these days around customization personal like so not customization as in i want it customized to me more personalization i want you to know who i am when i walk into bunnings and know that i've been looking up you know um screen doors and i want you to tell me that i need to go straight to aisle 45 like you know um we want to know these things because going in and

being anonymous feels really impersonal we and the data is able to personalize the the the experiences that we have every day in in so many ways when it comes to buying your most expensive asset though it is a little bit like you know the sort of 1990 something called up and wants its process back and suddenly you're thrust back into this process that is opaque not trend you know it's hard to know what you're up to it's hard to know what what to do in what order you're not sure if you can trust the people that uh that you're being asked to talk to about things or getting information from it is very old school and it's we've we've gotten away with it for the time because of the the time period between transactions so you know by the time you know

seven years on average kind of although that's a little bit old now sort of up to 12 years in some markets but if you've only doing if you're doing this for the first time or if you're doing this for you haven't done it for about 12 years you tend to forget or you have a little bit of ptsd when you go oh god yeah that's right i remember this is awful um but you kind of endure it because well it only happens once but i think we're becoming increasingly impatient with that if i can buy a pizza and see exactly where it's up to and how far away it is from my door and i can do that for a product that cost me 30 bucks maybe i should be able to do it for something that cost me 300 000 or 3 million you know like there's no excuse why especially when that process is

more complicated so we're becoming a lot we're becoming a lot more comfortable with the technology we're producing a lot more data as a society we are keen to see that personalization in everything that we do we're becoming impatient with it it feels like bad customer service and real estate kind of really needs to get on board with these kind of trends so that humans can stay as part of this service process rather than being automated out of the equation yeah very well so i think the thing that excites me uh one as you've touched on already that the expectations are going to increase which will force the industry to respond but what i also love about the intelligence aspect of the exercise is that the old reliance, the reductionist approach to

try and get it back to one or two indicators to make very expensive decisions that are often a bit of a roll of the dice. With the complexity and the ability of technology to actually embrace all of those dynamics and actually give us a much better direction on what we should be doing when it's very exciting i think but um look you've already touched on the next one in a little bit of detail already but from a timing perspective uh we're in the in the cut and thrust oh wait we're right in the middle of it and we're right in the middle of it and you can see evidence of this in a couple of different ways so here's the here's the counter model to i don't want to do technology because i like to deliver a personal service um which i hear a lot um the thing is

that because our expectations as consumers now created by the mobile phones in our hands are so instantaneous and so customized and personalized you cannot deliver a personalized service if the only tool you have in your toolbox is a mobile phone to call people because what that turns you into or or email to support that you know it's a bit of email to support that because a couple of things first of all email is the least secure way on the planet to share important crucial deeply personal information including bank account details contracts you know all of that sort of stuff we are actively being targeted by cyber hackers which is now a militarized and and you know and um organized crime globally so and real estate agents being front and center on the

internet in promoting themselves are basically putting themselves out there to be hacked so we can't you can't do that but the other factor that is showing us that we are at crisis point and tipping point is this whole idea that the demands of customer service now or what good service looks like being so deeply personalized by the data means that a human being can't physically deliver that themselves through a mobile phone because all that happens is they become a bottleneck and the only way to work your way through that if you don't want to embrace the technology is to work harder and we've seen the industry try to do this for the last couple of years and covid kind of ramped it up even more but this is where we see the industry starting to go into

interpersonal crisis around or personnel crisis where we have unprecedented amounts of burnout in the industry we have you know 65 plus of both real estate agents and property managers claiming that they experience stress and anxiety on a weekly basis aligned to their job um numbers that show that there is no work-life balance except in a very small proportion of people who kind of really get it and who have embraced tech and and so it's broken like the system's broken and our there's a tipping point in every every process or lack of process where you get to a point where you realize, I don't want to learn the new thing because I think it's scary and I don't understand how it works and it's going to take me time to do it. And I'm worried

that there are risks involved in learning something new or running a new process versus my old process is so broken that it is highly risky. It's really risky. It's exhausting me and it's taking me so much time. So at some point in that tipping point, you get to a point where people go actually you know what i have to learn the new process because i this just is not sustainable anymore and for an increasing amount of number of our industry sadly this kind of well we just need to learn the new process is actually being going is actually in ending up in i'm going to walk away from the whole thing because i just can't physically do it and that's where we need better technology training or we need better understanding around this stuff to humanize the

technology to make people understand or help people understand that this isn't about either or this is about human and tech working together to create amazing experiences in real estate that create delighted clients and in fact grow and build your business it's not about you know just loading people up with more problems extremely well said now from the sort of governance front then what legislation is impacting the property industry in in big brush strikes as you say so there's a couple of things that have recently come down that I think most principals and directors of real estate agencies may not yet be aware of Fair Work Australia so at a federal level because in real estate here's the other you know unique and special thing about

Australian real estate is that we are a federated business you know structure so the irony is is that Australia's single biggest asset class which is residential property which CoreLogic said recently or last yesterday we're now a 10 trillion dollar asset class residential property bigger than commercial by at least nine ten times right um but we are governed by local bylaws and state based laws and then even local government laws in some areas so that makes us really as an industry as a real estate industry that makes us very uh parochial and focused on our own patch whereas prop tech is coming over to solve the problems of the whole process and in a prop tech mentality the technology businesses that we see out there at the moment are basically saying well yeah sure

WA is different to New South Wales but the sales process is kind of the same there's just some like little quirks that you know or different bits that happen at different points but the same thing happens in that people come together they put a property on market they sell it negotiate the price they you know transact and settle it like this is how this goes um so prop tech comes at it from this sort of big picture down point of view whereas real estate agents and property managers can get very caught up in the in the day-to-day of the of the detail where what what is happening though at the same time so we're good at solving things that are common issues across the whole landscape and we need to do that as a technology industry because

if you can solve for seven states and two territories in Australia you can then pretty much add 52 states from the US or you know the UK because it's just we're used to dealing with that complexity so we're really good at solving and simplifying complexity whereas the real estate industry tends to get very bogged down in its local complexity what is happening though too at a federal level is that um the federal government has now with fair work laws changed the definitions or added to the definitions of work health and safety to include mental health and under that and under those and they came in in april this year uh so now directors and principals are just as responsible for the mental health

of their working environment as they are for the physical health. So known risks need to be managed proactively inside your real estate business. And known risks include the statistics and the data, which is out there through both the RISE initiative and MRI have also released a whole lot of data that shows that this is an industry in mental health crisis and if you don't have good procedures and processes for helping your team members deal with abusive clients um report in if they're

coming close to burnout know how to you know the the old the old idea of telling them to you know toughen up princess take a cup of concrete is going to land you in just as much trouble as someone slipping and hurting their back on a you know on a not picked not swept up you know piece of water or something like that yeah broken tile yeah good to hear what about the uh the uh energy efficiency legislation uh that's that's coming in where does that sit yeah so so what where it hasn't come in yet but what's happening at a state and uh state and federal level is that governments are coming together to identify uh and they've done this at a commercial level and so the commercial property sector is very far ahead of residential in terms of energy efficiency

of buildings and they have a neighbor's star rating system and australia actually um pioneered this research and rolled it out across the world where basically major commercial buildings have a star rating system that measures how effective and efficient they are and the data now shows inside commercial real estate that energy that buildings that have a higher star rating and it's out of i think it's out of i can't remember five seven something like that um but the higher the energy rating energy efficiency rating the more rent they get because the running costs are less right so you're paying and and the amenity is seen to be better and the quality of work life balance or whatever but you know the quality of the work environment is seen to be

more effective what's now happening across um state and federal levels is and with the csiro is working on a rating system for residential housing now it's not in place yet but it is definitely coming and what that means is that across australia's 10 trillion dollar asset class they are and the banks are working um on this already because they need to understand the risk assessment of their portfolio of their mortgage portfolios how much of their mortgages that they've got out there are to properties that are not energy efficient what we're seeing though from the early um outcomes of that is that over 80 percent of australia's existing residential property is of a two star or around two stars now that is out of seven stars now some of that is

because until recently the technology to make things seven stars hasn't existed the majority of our housing stock is you know all been built before sort of 1980 you know like it it makes sense right we've been building properties like this for the past 200 and something years um it makes sense that they would not all be you know seven stars but this is really interesting if you're a property investor or if you're interested in the property market because in the old days being five years ago we used to look at properties that were renovators delights you know like you look at a property to say well can i do something to this to make it worth more and traditionally that would be can i

knock out a wall can i make it a bit more open plan can i upgrade the kitchen can i you know what can i paint uh what is the not structural work that i need to do to pretty this place up to either flip it or to just rent it for a little bit more money right what we are going to see though is the new renovators delights actually being properties that are lower stars that can be more easily turned into higher stars through through that lens but but i can't stress enough how this is going to fundamentally change what happens in property for the next five years because we've seen the contractor and the tradie and the supply chain issues that came out of covid a couple of things are going to come out of this as this becomes the norm there is going to be a

moment in time where the home owning populace so all those baby boomers and gen x go what the hell do you mean my property is only two stars and that is going to create a flurry of activity to a understand well how do i make it worth more like there's going to be a very big education piece that needs to be played in this space to help people understand what do I need to do and how do I assess the products and the things that I need to add to my property that's going to be um there's going to be a a crunch around getting those products into market finding suppliers who are reliable and trustworthy who can deliver them and in this space that's where real estate agents have and property managers have a huge role to play because they already

have trusted relationships with um with their suppliers and their tradies they know how to manage property and project manage property and i think this is where we're going to start to see that high the new model come out where property managers actually start to manage property that is not necessarily rented but is actually owned by people who you bought the i bought the property through you you've got this subscription service or something can i can you help me with this because this is too big a project to get it up to or we're thinking of selling we're only a two star at the moment we want to get it up to a four star before we sell so as well as you know fixing the down the gutters and and you know spray painting the or you know spray painting the

bricks or cleaning up the garden what do we actually have to do to change over to electricity or like what is the size of that project going to look like and is that juice worth the squeeze when it comes to sale time because what we're going to see is that in a street where there are two four-bedroom homes where one where they both have miller appliances and open plan living and a swimming pool and you know and two bathrooms and stuff like that one will be seven star rating or six star rating and one will be three or four star rating and the difference in price even though those properties may be identical in terms of features that we have traditionally looked at in terms of what thing you know same number of bedrooms same number of car spaces we're going

to be looking at different features to understand the value of it and the valuation in the banking industry are getting all over this right now very exciting as a as a ex-architect kylie yeah i'm really excited about the opportunity that's going to bring both to uplift the efficiency of properties, but also the industry and the investor opportunity to take advantage of that rating system to introduce another area where they can potentially add value above and beyond the traditional. And what I also love about what you're sharing with us is that reaching that tipping point, I've already seen in the industry where there's been a big shift because of the technology technological enablement that's come into the industry where in you know not even 10

years ago it was really difficult to convince someone to buy a property not in their backyard much easier proposition now to get people to become borderless in their outlook around property because of all the technological advancement that's happened it makes it very easy for people to actually get a much better feel for locations and properties remotely stay with us bushy and kylie we'll be back after this short break hi just before we get back to the show i want to take a couple of seconds to tell you about a great live and free workshop that you can enjoy it's going to unpack the art and science of true property investment and it's got the potential to transform your investment approach and give you a gps that's going to help you to achieve your

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The Property Wealth Blueprint. So take a second now and jump on getrare.com.au forward slash financial freedom. Repeating that again, that's getrare.com.au forward slash financial freedom as the first step to taking your property investment to the next level. this is realty talk powered by realty.com.au welcome back we rejoin the conversation with bushy and kylie putting all this together how how is this likely to change how real estate professionals and their agencies are structured and run and then we'll talk a little bit about the opportunities that coming out of all this yeah i think i think property management is moving away from being something that happens off to the side while the you know the glory boys go

out and sell stuff i think property management is going to become the heart and soul of all real estate businesses we're seeing we are also seeing because of these changes around you know fair work and the legislation and the sheer energy that is required to run a business that has an hr function and an eap function or um you know there's a lot of there's a lot of compliance that is required that is almost becoming and and technology and technology understanding and and having a technology roadmap for your business and all of these things are making it really difficult for mum and dad and a couple of girls on the you know the back office to those offices to exist unless they're part of a bigger you know a bigger system that is supplying

those those areas so what we saw during COVID uh it was that those businesses that had really good technology or had had a technology plan didn't have to be really good they just had to have an idea as to what they were going to do and ideally have migrated to the cloud we saw those businesses that had half a clue in that space start to really separate from the pack and Macquarie's new benchmark report shows some of this as well in it quite clearly you can see that real estate is becoming more corporate residential real estate is becoming more corporatized we are moving away from being a cottage industry of mom and dad operators to sure we can still be small businesses but we're becoming bigger small businesses and in that way we are having bigger you know better processes

and structures and employee protections and better can you know commitments to clients and all of that is being done in a lot more of a you know compliant and and robust way or more process-driven way what we're seeing too though is that you know this is only just starting to be talked about but i think this um last bit around what's coming down the pipe with energy efficiency is going to be the thing that makes this definitely happen that property management will be at the center of it so every real estate agent on the planet is desperate for leads every real estate on the planet doesn't all well not every real estate on the planet but but we there is a disconnect between the desire for leads and the repeat business that comes through

what's missing is that glue in the middle of why would i in the 7 to 12 years when i'm not buying or selling why would i have a reason to stay in touch with my real estate agent well the same reason like you would have a reason to stay in touch with your lawyer or your dentist like you don't really want to hang out with those people but you know that they're there when you need them but if there's a service that they're offering across that period and so that's where i think that subscription service of property management one of the great and i and here's my here's my personal anecdote but but backed up by conversations with hundreds of friends we my husband and i owned a couple of investment properties we've been very um very lucky uh and the two properties that i

care the least about are the ones that are the least problem to me um when they're out investment properties right but so when something goes wrong with either of those somebody sends me an email or reaches out to me on the phone and says um you know the fan's blown out on the on the on the exhaust fan for the stove uh it's under the amount you could rather us to fix it totally absolutely please fix it like done like take it out of the next month's rent good fine when it happened and it has it is we we do not have a functioning exhaust fan i am deeply unhappy with my oven i do not like my stove top i really really really want someone in my house that is not me uh ideally my husband to um fix it in my house it doesn't work but it involves rock scissor paper

and you know the edge of divorce to come up with the who's going to take the time to get the quotes to or to find the tradies who then will or won't turn up to do something you know who then do or don't quote over a period of time where I've completely lost track of where we're up to and and then I can never remember I've lost the will to live over whether we actually do it or not it makes no sense i want one throat to choke and that choke that throat should not be my husband's on on fixing things and i i might be not i might not be the majority but i am part of a growing market of people who who see their time as valuable who would like to pay someone for the for some service i want one phone i want one phone number in my phone that i can call to say

can't get is you know is can i get a quote on fixing the thing that's not work my house isn't working make it make it work um so i think that's where and then also we need solar panels we want you know we want we're wanting to upgrade our property what does a sensible upgrade process look like and even if you're buying something right now knowing this is a two-star home we're going to be but it's our forever home we're going to be here for the next you know 15 10 15 years while the kids grow old here or grow through school what do we do over that 10 15 year period to turn it into a seven star home so that when or whatever the the stars are in 15 years who's going to help me do that who's going to partner with me is that really is that 26 million or you

know 20 million homeowners individual problem to solve or is there an industry out there that could lean into that problem and offer help oh yeah there is it's called real estate agents it's just that our business model and our way of thinking around it because we're so busy chasing leads the way we've always chased them hasn't adjusted to that and that's where the technology can help us yeah i love it there's several things i love about what you're sharing with us and that is firstly that the unsung heroes of the real estate industry property managers are finally going to see some uh spend some time in the sun but but secondly i think that property managers are also got the potential to become project managers in the context of talking about and the and the

blurring the line between a property manager and a selling agent that they're going to start to come together and create a different skill set essentially that's going to address the issues that are current in the industry so very exciting on that front i'd love for you to share we've talked about the property professionals to some degree but what are the opportunities for property investors buyers and sellers in the space given the changes that you're seeing coming from the prop tech side of the equation well i think if i if you're buying regardless of whether you're buying for yourself or whether you're buying as an investment property i think look at the properties like start from now right look at the properties that you're that you're considering through that

energy efficiency lens um CSIRO on their website have a thing called livability it has 17 points that make a property livable it's a great starting point to understand what energy efficient it's not just you know oh do they capture the rainwater or do they do gray stuff it's actually what are the things being that do or don't exist they might not exist yet in this property that make it more affordable to run yeah um if they're used properly so so look at the properties that you're wanting to buy now that you can do that work to to increase its value as you live in it or own it or rent it out because we we are moving into a new era where the haves and the have-nots inside property ownership like we see in like we see in commercial uh you know there are there

are property owners who own you know very high end high star rated that get premium rents and then there are people who own the rest of the stuff right so um we're going to start to see residential fall into classes um in class system and of of good of you know excellent okay and pretty piss poor um energy efficiency and what will happen if you are a landlord owning a a lower end property is that you'll struggle to get the rents that you want uh you know and and look maybe maybe that's hard to imagine right now we're ready you know vacancy rates are so low but it um but things will start to change quite quickly and and you don't want to get caught out by it you want good tenants who rent long term in great properties that you know that you don't that

you can just put money in the banquet yeah i love that i'm very excited about the changing dynamics and the opportunity that's going to create and i want to really thank you for sharing these very informative and inspiring insights kylie and and thanks again for joining us on australia's longest running and most proper property show here on property hub successful property investment is a game of finance do you have the right team and the right game plan realty talk is brought to you by KnowHow Property. More than mortgage brokers, Bushy Martin and his team of investment architects set you up with a sustainable strategy structured to lower your costs, tax, risk and stress while increasing your capacity for growth. KnowHow has helped over 1,900 homeowners and investors

secure more than $800 million in property wealth. So get set to live more, work less and live your legacy. Want to know how to invest in your freedom? Visit knowhowproperty.com.au Subscribe now to Realty Talk. It's out every week. And that brings us to the end of this week's show. A big thanks to Kylie Davis and Bushy for a really great show.

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