Is Australia an ideal breeding ground for proptech?

The opportunities and challenges facing Australian proptechs have been explored in a new report.
 
The first annual Australian and New Zealand (ANZ) PropTech report, from FuturePlace, has acknowledged Australia as “an excellent country to launch early-stage tech ventures in”.

Report authors John Pozoglou, the founder and chief executive of FuturePlace, and Julia Arlt, co-founder, said that the entrepreneurial potential of Australian proptech was a theme that came up repeatedly in their conversations with proptech and real estate leaders in compiling the report.

“One clear indicator of this is the diverse focus areas and high valuations of the Australian tech start-ups to emerge from the country in recent years,” they said.

Opportunities open to proptech start-ups

When looking at the success of proptech firms, in particular, Mr Pozoglou and Ms Arlt have chalked up the ability of start-ups to gain traction domestically to three major reasons:

The consolidated nature of Australian property ownership

According to many sources interviewed for the report, the consolidated nature of Australian property ownership was a common theme.

The report highlighted that 17 construction companies are responsible for 90 per cent of the value that has been built in Australia.

“This kind of centralised ownership means that breaking in for pilots can be hard, but that once startups are in, they’re in,” the report said.

Entrepreneurial support programs

The report also flagged the large amount of support on offer for start-up activity in Australia.

Highlighting the Entrepreneurs’ Programme and LaunchVic as examples, other supportive programs on offer are the Commonwealth Scientific and Industrial Research Organisation’s Kick-Start initiative.

The research and development (R&D) tax incentive

This tax credit for research and development activities is another reason why so many proptechs have taken off across the country.

With more than 10,000 recipients of Australia’s R&D tax incentives in 2019 alone, it’s a number that’s likely to grow even more post-COVID-19.

The challenges facing Aussie proptech start-ups

While the opportunities outlined above have bolstered the number of proptechs participating in the property ecosystem, the report also acknowledged that many of these start-ups do hit a speed bump when it comes to achieving scale, thanks to Australia’s relatively small size.

“Consider that the total Australian housing market is worth $7.1 trillion USD as of 2021, according to the Australian Bureau of Statistics. Meanwhile, the US housing market was worth over $43 trillion in January 2022 according to data from Zillow,” the report conceded.

A lack of talent is another imposition on Australian proptech start-ups, with recent Hays research revealing that 64 per cent of employers expect that the effectiveness of their organisation or department would be impacted by a shortage of tech skills over the coming 12 months.

Aspiring for growth

Even though there are a number of challenges facing businesses looking to scale up, Australian proptech companies are well-positioned to expand to other countries, according to the report.

Mr Pozoglou and Ms Arlt attribute this potential to the shared language with countries like Singapore, the UK, and the US and the close proximity to other Asia-Pacific markets.

Citing analysis from a 2021 McKinsey report, Outward bound: Why Australian companies should look offshore for growth, they also acknowledged that international expansion is a well-trodden path for Australian business, with nearly half of the ASX 100 generating more than 30 per cent of their revenue from overseas activity.

“With numerous potential real estate clients across the Americas, Europe, Asia, and beyond, proptech firms are positioned well to realize substantial overseas growth of their own,” the report concluded.