It is the world’s biggest asset class, yet real estate is behind the curve compared with the financial sophistication in other sectors. Fortunately, the industry is on the cusp of a revolution and data is at the heart of it.  

Chris Marriott, CEO, Southeast Asia at Savills, says: “In the service industry, data is the new oil and will power the modernisation and transformation of real estate. To date, the industry has lacked the tools which are on offer elsewhere in the investment industry; accurate live time data will bring real estate in line with other investment products and will drive revolutionary changes in how investors can access, what is the globes largest asset class.” 

Savills is an investor in Singapore-based Real Estate Analytics, a data company which is creating data lakes for various real estate markets, starting with Singapore and building AI applications for adding value to the sector. Founded in 2019 by Dr Jean-Michel Paul, Patrick Yan and JiaJia Yao, it  specialises in Big Data and AI in real estate and employs more than 60 statisticians and data engineers. 

For the longer term, Paul, CEO and co-founder of Real Estate Analytics, is even more ambitious, The Belgian academic and investment manager is on a quest to create a new form of money and in the process could revolutionise real estate with Big Data and AI. 

Paul’s endgame is the launch of an Asset Backed Currency for Digital payment (ABCD), with the tokens backed by real estate indices with real time updates. These tokens will meet the appetite for “a new form of money,” he says. ABCDs would not be subject to the same debasement as fiat currencies, which are currently in the process of being devalued by the inflationary effects of money-printing and QE. 

Although blockchain technology will be used for the tokens, they are very different from bitcoin or other cryptocurrency because the value will be based on the value of real assets rather than sentiment.  

Despite working on something which shares characteristics with real estate investment trusts and cryptocurrencies, Paul is sceptical of both. “REITs are expensive to run and not very liquid or transparent,” he says, while crypto’s failings as a store of value have been demonstrated by its 2022 performance. 

In order to launch an ABCD, there needs to be an index and not one like conventional transaction or valuation-based real estate indices, but one which shows real time performance. This would be truly revolutionary for real estate, where indices are based in historic data. 

Real Estate Analytics has created a data lake for Singapore residential real estate, using data from brokers, government agencies, banks and 360 virtual tours of assets. This data can already predict the performance of new property launches, Paul says. His firm’s AI tools can determine what mix of apartment sizes will work best in certain locations and the ideal pricing level for developers for example. 

This stage of the development is complete and will power Real Estate Analytics’ advisory business in Singapore. In November, Real Estate Analytics, Savills and Lancia Consult launched the “REA Developer Suite”, which will determine and rank key drivers in developer land pricing and unit sales. 

Marriot says: “There’s ample data in the marketplace, be it from Singapore’s URA or third party sources; and most advisors are able to give a two-dimensional view of what’s happening in the market, but there has never been a multi-dimensional tool which accurately determines the best price to bid for land, identifies ideal unit sizes and mix and launch price optimisation. 

Real Estate Analytics is now expanding its tools and services to incorporate commercial assets and completing core data capabilities in both Hong Kong and Malaysia. 

So, how do we get from data analytics tools to a “new form of money”? The data aggregated and analysed by Real Estate Analytics means it will be able to track the performance of Singapore real estate, creating “not an index of what has been transacted, but an index of what exists,” says Paul.  

Just as the performance of the S&P 500 can be replicated by holding 40-50 stocks, so the performance of Singapore’s real estate market could be replicated with a relatively small portfolio of assets, says Paul. Institutional owners could gain liquidity for a part of their portfolio by supporting the launch of a ABCD. 

A real time market index opens new possibilities for real estate investors, both those who wish to track the market and those who want to “short” it, something which has been traditionally difficult in real estate. Paul uses the example of a developer who may wish to short the market in order to hedge the performance of their projects against a market downturn, construction cost inflation and increasing interest rates.  

A basket of those short positions would in aggregate create an opportunity for investors to be long real estate, ie to invest in the index without the need for any physical assets to be in play.  

“All these things together form a story where real estate adopts financial techniques, using Big Data and increasing efficiency,” says Paul. He estimates that if real estate returns could be improved by only 0.1% using proptech, then over eight years, the value added in APAC alone would be a trillion dollars. 

Further reading:
Real Estate Analytics

Contact us:
Chris Marriott