By Kylie Davis, Head of Research, REINSW
Greater collaboration between legislators, innovators and real estate is required to create a transparent regulatory framework that both protects consumers and helps the industry embrace new efficiencies through technology.
That was one of the key lessons from the second Future of Proptech lunch held by the REINSW on 30 April 2019, where it was revealed real estate agents may carry a legal risk when they adopt some of the more disruptive technologies.
On the panel was Sarah Bell from AIRE, which delivers AI to the residential real estate industry; Thom Richards from property management software app Managed, which negates the need for trust accounting; and Justin Butterworth from leasing platform Snug. Representing NSW Fair Trading was Bjorn Borg, while Lisa Indge from Let’s Rent provided the real estate agents' view.
Key revelations that came out of the panel discussion included:
- Advice from NSW Fair Trading that legislative change typically takes five years, while regulatory changes can take two to three.
- The lack of engagement and accessibility of regulators risks stifling innovation and preventing Australian proptech disruptors from being internationally competitive.
- Proptech innovators may be best taking a ‘forgiveness not permission’ approach rather than waiting for government. Accordingly, they should structure the risks and costs of educating the market.
Exponential innovation testing regressive regulation
The audience was told that more than US$20 billion is expected to be invested in proptech globally in 2019, representing growth of over 9000 per cent since 2012. Internationally, the growth of proptech is occurring faster and with greater momentum than fintech.
Unlike fintech however, which is regulated in Australia by national legislation through ASIC, proptech must contend with different legislation across each state, providing additional challenges for local startups.
This was occurring at a time when dissatisfaction with real estate agents and the disjointed and fraught process of buying, selling and renting property was growing.
“When you pick up your phone to use Uber, Airbnb or Uber Eats, the process is instantaneous,” said panel moderator Kylie Davis. “But when you try to buy a house or rent, it's like 1984 called and they want their process back, and suddenly you're back to handling paper and waiting for phone calls to be returned.
“The legislation we have at the moment, while looking to protect consumers, is failing to deliver good service experiences, while the agents who do want to adopt these technologies are between a rock and a hard place.”
The panel heard that overseas governments were starting to collaborate with innovators to create a new approach to legislation that sets out frameworks to guide desired behaviour.
“It’s the role of technology and innovation to push the boundaries, while legislation has typically reacted,” said Bell. “Legislation needs to come in at the design stage – at concept. The European Union has published guidelines for the ethical development of AI, and I don't think they're unreasonable. They embrace the hope that exists with new technology, and I think they're the best practice guidelines in development that all governments should be adopting.”
At risk of being left behind
The speed of innovation means governments that want to create reactive legislation are being left behind.
“Since the Second World War, we've been running on Moore's Theory that the speed of innovation would double every two years,” Bell said. “But you apply the connectivity of AI with network theory, which is just enabling the way that we're using technology, and the result is exponentially speeded-up change. It's impossible to leave it to reaction now.”
But Director of NSW Fair Trading, Bjorn Borg, said it is not the role of regulators to approve or endorse new technology, but to protect consumers and make sure there is legal redress when things go wrong.
He conceded regulators need to improve their engagement with innovators, but said innovators could help regulators get up to speed more quickly by identifying the changes needed to be made that accommodated multiple market players, not just themselves.
“We need as much background as possible, not just on what the product does, but the problem it is solving and any international trends that show how it is playing out in other jurisdictions and economies,” he said. “Without that clarity, regulators are going out there trying to find that out for ourselves, but we're not the experts in this particular field. That's where you then get even longer delays.”
Justin Butterworth from Snug said the current approach from regulators was stifling innovation and making Australian technology uncompetitive internationally.
“Here we are, two years down the track in my space of digital bonds without having effective conversation, without bringing about innovation to the market, without having learned the insights from consumers and regulators, and we'd like to see that change,” he said.
“Just two weeks ago, the other startup in this space internationally raised $40 million at a $300 million plus valuation because they have not faced the same restraints. It's not acceptable to be two years down the track with the inability to meet and discuss progress innovation in this country.”