How do the Australian and US proptech sectors compare?
The insights as summarised in this article were provided by Ari Ginsburg (Earnnest), Marisa Warren (ALIAVIA Ventures) and Peter Schravemade (Proptech Association Australia) through The Proptech Panel: when America sneezes.
Differences between the US and Australian property markets
One of the major differences between the two markets is the distribution of financing risk. In the US, the government is responsible for ensuring people can pay back their loans, while investors take on the risk of interest rate changes. In Australia, banks take on the risk of people not paying back their loans, but borrowers have to pay the interest themselves.
The Australian property market is more heavily regulated by the government, which makes it more stable and predictable. However, the US market is larger and more innovative, with more players in the market. Australian companies trying to expand into the US are often seen as more mature because they’ve survived strict regulations. However, it can be expensive to compete in the US, and there are also challenges related to currency exchange rates.
Similarities between the US and Australian property markets
Both the US and Australian property markets face challenges related to home availability, affordability, and house price appreciation. The cost of homes is going up, making it harder for people to buy or rent. Factors like zoning laws, the availability of skilled workers to build homes and climate change can also affect housing availability and affordability. Climate change is causing extreme natural disasters that can put people's wealth at risk.
During Covid, people in both Australia and the US moved to areas outside of major cities to work remotely. This led to increased demand for homes in those areas, causing prices to rise more than expected. In both countries, there is also a demand for valuation technologies that can help people value their homes accurately and quickly.
Challenges facing US proptech
The US real estate sector has a more negative outlook compared to Australia due to several factors, including:
- A limited residential housing supply,
- A bifurcated market, and;
- Challenges in raising capital for proptech companies.
This has led to frustrations with low fixed-rate mortgages and significant vacancies in some cities and shortages in others.
Proptech companies in the US are facing challenges in raising capital at fair valuations, and investor expectations have changed with a shorter horizon on cash burn. With low unemployment, proptech companies in the US have two options:
- Pay more for talent
- Reduce expenses drastically
However, while the current situation may be seen as "doom and gloom" by some, for those willing to take a chance, there are significant opportunities to be had, such as potential mergers and acquisitions in the proptech sector and transformative technologies like Chat GPT and GPT 3.
Expanding into the US market
When launching into the US market, it's important to keep in mind that revenue is queen. To establish consistent, repeatable sales revenue, you need to get on the ground and understand the market. Remember that every market is fundamentally different, even within the same state, such as California. So, it's crucial to understand your customers and where they’re located. For a successful founder-led sales approach, base yourself in the right market and take the time to understand how your customers buy.
Click here to learn more about what Proptechs in the Stone & Chalk community are doing to drive change within the Australian ecosystem.