Some way to go for proptech to hit home

Customers still heavily lean towards traditional processes when it comes to researching property, Le Toan

PropertyGuru, the owner of batdongsan.com.vn, has been in difficulties in Vietnam with a sharp decrease in turnover. In its first quarter result released on May 23, Vietnam marketplace revenue decreased 34 per cent on-year to $2.4 million, as government actions to tighten credit continued to impact the overall number of listings in the market.

“The number of listings was down 32 per cent to 1.1 million in the first quarter compared to the prior quarter. The average revenue per listing was in-line with the first quarter of 2022,” the company said.

PropertyGuru operates in the three markets of Singapore, Malaysia, and Vietnam. Only the Vietnam market saw a loss in the first quarter.

Hari V. Krishnan, PropertyGuru CEO and managing director, said that the company’s overall first-quarter results were a successful start to 2023 as its performance in Singapore and Malaysia helped offset the challenging market conditions in Vietnam.

“Vietnam remains the primary challenge in the near term, as governmental monetary policy has significantly impacted real estate transaction activity. We believe that these pressures will begin to abate in the latter part of 2023 and into 2024. We continue to manage our operations proactively to maximise performance while laying the groundwork to take advantage when the Vietnam real estate market recovers,” said Krishnan.

CFO Joe Dische added that 2023 had started off strongly despite the anticipated challenges in Vietnam due to monetary policy actions by the government in a targeted effort to cool real estate activity.

“We remain confident in the underlying strength of our offerings and the opportunities in Southeast Asian. As a result, we are reaffirming our 2023 full-year financial outlook for both revenue and adjusted earnings before interest, taxes, depreciation, and amortisation. Lastly, we are encouraged by the types of strategic merger and acquisition opportunities we are seeing in the marketplace as we continue to explore and evaluate adjacent opportunities to deploy available capital,” Dische said.

Seeking efficiency

According to the Proptech Vietnam Network, there were 150 proptech startups by the end of 2021. They typically seek short- and long-term leasing for holidays, lease of houses to support real estate brokers, lease of coworking spaces, and asset management for short-term leasing.

In terms of property management and operation, there are apps such as building utility management platforms, and repair and maintenance service platforms.

According to the Vietnam Real Estate Association, the real estate market will reach $1.23 trillion in value, accounting for 22 per cent of total economic assets by 2030.

The market is still young, so analysts believe there is space for proptech development. However, according to Savills Vietnam, many people still only want to buy when they can see the property directly, and most transactions are carried out with cash payments.

Meanwhile, estate developers prefer using brokers because the service is cheap and brings high efficiency. Often, realtors collude with brokers to manipulate prices and cause artificial fever in the market.

As for proptech, at first, it focused on product distribution and real estate management. But this has a low profit sharing ratio. Operating and leasing properties is a particularly hard job to carry out, Savills Vietnam added.

Moreover, it is not easy for proptech to meddle in the long-lasting affairs between banks and real estate developers, as well as in the lending that funds real estate purchases.

However, experts said that there are still opportunities because in the long term, the real estate market must become more transparent and sustainable.

Domestic knowledge

In September 2022, Propzy, a startup that had raised $37 million in investment and was the county’s largest proptech company, folded after seven years. It was previously lauded as having the potential to become a technology unicorn, but it cited lack of capital as its reason for terminating operations.

Propzy’s withdrawal was not the first of its kind. Timhome launched in Vietnam in 2016 and was backed by Homer.com. However, not long after that, the unit quietly withdrew from the market, while competitors batdongsan.com.vn and Cho Tot Nha continued to thrive and were recognised by Property Guru (Singapore) and Telenor, and soon acquired.

There were similarities between both Timhome and Propzy, in that they both tried to exploit a market that has very high local barriers, and the founders – Andrew Oleinik at Timhome and John Le of Propzy – had limited knowledge of the Vietnamese market.

Meanwhile, rival businesses such as batdongsan.com, Cho Tot Nha and Rever, are run mostly by Vietnamese.

Nguyen Hoang, a property realtor, said that in Vietnam, proptech was currently facing many barriers, as the psychology of free use is still high, and people do not want to pay when using proptech platforms and a lot of virtual information.

“Moreover, the real estate quality in proptech is frail and not based on any original real estate theory, with a big deviation in real estate knowledge. It is necessary for a successful proptech to have developed both two sides together: real estate and technology,” Hoang said.

Looking at the map of proptech companies in the market, Pham Lam, chairman of DKRA Group, estimated that there are only about 10 companies with clear strategies and outstanding scale.

“Very few companies understand the local characteristics of the industry and have a technology team to build compatible products,” Lam said.

A Vietnam Proptech market report released by Research and Markets in October 2022, said that the market was valued at $446.08 million in 2021 and is predicted to experience robust growth in the forecast period with a compound annual growth rate of 16.47 per cent due to a high adoption rate of digitalisation across the rising urban population.

Nguyen Bich Ngoc-Chairwoman and CEO RealTech There are many reasons proptech businesses face so many difficulties and can even go bankrupt in Vietnam. Firstly, most proptech development companies come from companies working in technology, so they have little knowledge and experience in the real estate sector. Meanwhile, products that serve market needs, users, and consumers are mostly difficult to develop because they are very new and lack research. Products for real estate companies such as investors and trading floors are mostly far from the actual needs of businesses. Real estate companies themselves, when developing the proptech segment, only stand on the position and needs of their companies, while to use technology and big data, more factors are needed, such as investment and in-depth studies and research. The majority of large-scale companies that invest in tech will find it hard to make a product that caters to individual needs and then develop it with mass commercial elements, such as business-to-business or business-to-consumer. This is a huge gap in analysis that leads to products that do not really satisfy end-users. Another factor is that in technology development, operation management is the weakest point of proptech companies. A product in the process of production and testing from the first version to the more optimal versions requires many users and their experience. This stage usually burns many costs and if there is no clear and good plan, or research and development goals, it will cost much and become impractical. Most technology companies that have successfully raised capital will survive this round, but the quality of their work depends heavily on the research and development team, which are mostly not qualified enough. In short, the biggest problem for proptech in Vietnam is that the tech team does not understand the needs of real estate. However, for the real estate team, the large costs and limited know-how about technology and product development are the biggest barriers. In essence, there is a large gap between the two parts of proptech, leading to startups constantly failing up to now. We entered the real estate market 15 years ago and implement real estate technology apps. We propose a starting budget of around $435,000 for developing a basic tech platform. Starting in real estate, Sen Vang knows very well about the segment, but when entering the tech world, we faced many difficulties and must always be flexible in implementing our development strategy.

Sound business strategy crucial for proptech players The property market is facing numerous hurdles, and Propzy’s failure makes it difficult for the proptech ecosystem to improve.

The tough proptech proposition ahead Compared to just a few years ago, the Vietnamese proptech market is now more vibrant, diverse in both quality and quantity with the participation of many different brands. But while the playground is now occupied both by traditional real estate businesses and tech companies, the risks are still apparent.