Wednesday, 27 May 2020

Data And Blockchain Are Joining Forces To Take On The Real Estate Industry

Despite not being as hyped as trending forms of investment like stocks and cryptocurrencies, real estate continues to be a proven moneymaker today.

The total value of real estate properties around the globe is estimated to be worth $217 trillion with worldwide revenues from real estate activities expected to reach over an astounding $4.2 trillion by 2025.

Given how valuable the market is, real estate has been a prime target for disruptive technologies. Online property listing and aggregation services now appeal to a wider segment of customers with a new variety of platforms that are seeking to change the way real estate processes and transactions are done. Online and peer-to-peer lending services like Sofi and Prosper have also expanded to offer big-ticket loans for home purchase and improvement.

Recently, blockchain, has become a major driver of disruption in the financial services sector including real estate. The technology is aiming to democratize the industry and challenge the long-standing dominance of established industry players. Projects like Atlant and Beenest, for example, are working on efforts like tokenizing properties to promote fractional ownership, building decentralized housing and rental marketplaces, and taking over escrow and legal functions through crypto assets and smart contracts.

Besides these new mechanisms, information is supposed to be the great leveler. However, real estate data remains inaccessible to smaller players. Private individuals and smaller real estate firms still cannot tap into big data despite the availability and accessibility of data processing tools.

Fortunately, this may soon change as blockchain and big data combine and usher in data marketplaces like Streamr and real-estate focused ReBloc to the space.

Benefits of Big Data

Prior to the arrival of accessible analytics, the high cost and resource requirements of running data projects meant that only large companies and organizations were able to enjoy the benefits of big real estate data.

Having access to data such as cost of ownership, neighborhood trends like crime statistics and census data, as well as property price histories enabled them to reliably score and price properties. Lenders feed data to their valuation models allowing them to appraise properties in their favor. Developers used these insights to mitigate their risks in pursuing project and property purchases. Institutional investors were also able to effectively forecast price movements in the market.

Developments in computing have considerably lowered the costs of data projects, opening up new opportunities to the smaller players. Platforms like Realtor and Zillow use data-driven techniques and algorithms to provide home buyers and renters with insights regarding price ranges and forecasts to guide their decisions.

Good Data is Hard to Come By

However, the reliability of information provided by these services can be put to question. These centralized services use proprietary data and algorithms which are not fully disclosed or made available to users. While the information they provide should be helpful, the lack of transparency forces users to trust these organizations without the ability to independently verify that the information they are receiving is accurate.

As an alternative, it is possible for users to perform their own analyses thanks to the availability of easy-to-use and affordable intelligence tools. However, the access to the essential element -reliable data - is still limited. Real estate data sets are often owned by these large institutions like banks and large property developers.

Public records may be available but they are also often unstructured or in non-standard formats making it difficult to readily plug in to tools. In addition, data coming from multiple and possibly unreliable sources will only result in insights of poor quality.

Blockchain-Based Data Marketplaces

Fortunately, the emergence of data marketplaces is opening up new channels from which users are able to acquire quality data sets. Blockchain-based data marketplaces provide more democratic and secure mechanisms for data owners and buyers to transact with each other.

Data that can be used in real estate market analyses is finding its way into these marketplaces. Streamr's marketplace, for instance, already features data streams of population densities, environmental data, and traffic data for select cities. The platform features a ratings-based reputation system which encourages data owners to only share quality data.

ReBloc takes particular aim at real estate data. The platform offers a data marketplace where vendors of all sizes can sell data and users of all sorts, from homeowners to banks can buy it. The company is also working on an innovative validation layer to ensure that data buyers only purchase quality data. When a user buys from the marketplace, the information is compared to data from various validator databases of other vendors in the marketplace such as banks, insurance companies, and multiple listing services. Only when the data is approved by the platform's verification protocol on the network can the transaction between users proceed.

A Level Playing Field

Real estate platforms, particularly blockchain-based ones, could greatly benefit from the availability of reliable real estate data. It can enhance their platforms’ algorithms and mechanisms that provide crucial market insight to smaller players in the industry.

Combined with blockchain’s inherent security and transparency, this could ultimately help establish a fairer and more equitable real estate market. Everyone would stand to benefit if the industry finally gets to operate on a level playing field where even smaller players and consumers have the option of being as well-informed as large institutions.

Legal disclaimer: The insight, recommendations and analysis presented here are based on corporate filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. They are presented for the purposes of general information only, and all the information belongs to the original publishers. These may contain errors and we make no promises as to the accuracy or usefulness of the information we present. You should not make any investment decision based solely on what you read here.

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