According to a report by Keefe, Bruyette & Woods, the proptech market will explode in 2021 as real estate loan transactions continue to be digitized and marketed.
The confidence indexes for Proptech – any type of business that innovates in the real estate industry – among CEOs and investors in the sector hit an all-time high in MetaProp's most recent semi-annual survey.
The CEO index rose from 4.7 at the end of 2020 to 7.7 at the end of 2020 and from 7.2 at the end of 2019. Investors were even more confident, ranking 9.2 out of 5.9 and 8. The confidence scale ranges from 1 to 10, with 10 being the safest.
Over the past year, remote online notaries have seen exponential growth, while the volume for both digital lenders and digital dealership platforms has risen sharply.
"The pandemic will prove to be a turning point in terms of the adoption and acceleration of digitization across the industry," said Ryan Tomasello, Director of Equity Research at KBW, in an interview. "It unlocked pent-up demand from millennials – the largest cohort of the population growing and growing in terms of homeowners – after a move to digital."
96% of proptech investors assume that the capital will continue to flow in 2021. This corresponds to a share of 70% from mid-2020 and 85% in the previous year. Meanwhile, 84% of CEOs forecast fundraising will be frothy in the next 12 months, almost doubling the 44% month-over-month and up 81% year-over-year.
However, within the mortgage industry, a divide remains between the desire to streamline the technology and how to actually implement it. In particular, the uninterrupted spate of refinancing in the pandemic created a puzzle for many lenders who needed automated processes but were unable to implement them.
It is inevitable, however, that creators will be forced to adopt such skills as younger homebuyers enter the market expecting a technology-driven experience, Tomasello said.
The onslaught of volumes has highlighted the inefficiencies in the industry and aroused increased interest among investors. This has resulted in a multitude of mergers and acquisitions as well as initial public offerings within the sector – a trend that is on the upswing.
Slightly more than three quarters of investors expect an increase in Proptech M&A transactions in 2021, compared with 63% in the survey in mid-2020 and 53% in late 2019. In the meantime, a higher proportion of Proptech CEOs forecasted 48% that their companies will be bought, publicized or given greater liquidity by the end of 2023. They rose 42% shares in both mid-2020 and late 2019, which were forecasting so over a three-year horizon.
"We have gradually seen leaders in the category emerge and acquire to scale up and expand their product offerings," said Tomasello. “We anticipate M&A will be an ongoing issue and we anticipate an increase in the activity of special-purpose acquisition companies. SPACs have accelerated in the broader market, and we've seen a number of SPACs that are right after the proptech space. "
KBW identified 14 proptech-focused SPACs looking for targets and 16 with proptech connections looking for targets. These 30 SPACs have a combined spending of $ 28 billion.