The use of technology in real estate has been increasing for past couple of years in Japan, making Real Estate Tech in Japan a very exciting sector.
With abundant capital, technology power and super bright talent, Real Estate Tech in Japan can give birth world leaders in 3D printing, alternative construction composites and other high tech innovations that real estate sector needs urgently. The reason behind this enthusiasm is the new government’s focus on enhancing entrepreneurship in the country.
The new administration believes that startup eco-system can only generate employment and help decrease the rising number of jobless youths in the country. As far as real estate is concerned, both government and realty stakeholders are trying to leverage the technology to expand the property market and maximize its reach. Of course, the government agencies have taken the initiative in this direction.
For instance, the Ministry of Land, Infrastructure, Transport, and Tourism has initiated various programs with the help of innovative technology that can address several key issues. One of them is establishing an investigative committee which with the aid of the internet, camera and other tools can hear valuable real estate and other problems through video conferencing.
Any person or group of people doesn’t necessarily need to be present for face to face conversation. They can do it from being far away from the committee with the help of technology. Another factor that led to innovation in the field of housing is the 2011 Fukushima disaster that forced the Japanese government to make a policy to have zero energy houses. In April 2014, the government announced to create new zero energy public buildings by 2020 and zero-energy private homes by 2030.
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33% of Japan’s energy requirement comes from nuclear reactors and rest from fossil fuels. The residential and commercial sector accounts for 30% power consumption. This is 140% more than what it used to be 30 years. Keeping in mind the rising energy demands, Japan has decided to build energy efficient buildings.
To achieve a zero-energy house, Japan depends on innovative technology such as the installation of photovoltaic cells on the roof, insulating performance of the windows and walls, improving the overall thermal performance of the house by using argon gas-filled, triple-pane, low e-glass materials, etc. Experts believe that these initiatives encourage private players to use technology not only for the realty sales but also for several other housing needs.
Real Estate Scene in Japan and its impact on Real Estate Tech in Japan
The economic growth in Japan has reported having slowed down in comparison to 2016. However, the real estate market looks upbeat and energetic. The property prices are increasing; property demand is firm and construction activities are in full swing.
The data from the Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) shows that in January 2017, the overall property prices index of Japan went up by 4.7% when compared to the same period a year ago.
Various reports suggest that Prime Minister Shinzo Abe’s reflationary economic policies have worked in favor of the property market. Since he came to power in December 2012, the property transactions have picked up, and prices have gone up. The increase in public infrastructure spending, devaluation of Yen and various other economic stimuli along with Tokyo’s successful bid to host 2020 Summer Olympics will intensify the new launches and demands shortly.
Major real estate destinations in Japan are metropolitan areas of Tokyo, Osaka, and Nagoya. While residential property sale is up in Tokyo only, land prices have increased in both Tokyo as well as Osaka.
Future projections show that Japan will see a huge housing surplus because of its shrinking population. National Institute of Population and Social Security Research says that Japan will lose one-third of its population in another 50 years and its 40% population will cross 65 years by 2060. The country is staring at a huge surplus inventories in future.
As far as office space is concerned, according to JLL’s Tokyo Market Office Update of June 2017, Grade A vacancy rate has risen slightly. “The vacancy rate in the Grade-A office market in Tokyo stood at 2.7% at end-May, rising 10 bps q-o-q but declining 20 bps y-o-y. The secondary vacancy in Marunouchi offset demand for new buildings in Otemachi and expansion demand in Shinagawa,” says the report.
Real Estate Tech in Japan
Along with property websites that serve the purpose of listing, searching and marketplace, Japan has many startups and companies which are using the latest technology in the field of artificial intelligence and Internet of Things (IoT) to look for various housing solutions. Since Japanese real estate market doesn’t attract foreign buyers or investors substantially, these websites and technologies mainly serve the native or local population.
Along with realty tech startup activities, venture capitalist funding and angel investment have also started. According to reports, Mitsui Fudosan, which is a Japan-headquartered real estate group, is coming up with startup fund with venture capital firm Global Brain.
The company has confirmed that this “The 31Ventures Global Innovation Fund I” is worth US$44.5 million and has a term of 10 years. The fund will initially focus on Series A-stage and later-stage startups from across the globe. It also includes some pre-series A investments as well. Besides real estate, the company will invest in startups from other verticals such as internet of things (IoT), energy and green tech, sharing economy, fintech, e-commerce, robotics, and life sciences.
Real Estate Tech in Japan has also generated a fair amount of interest among VCs, and they have earned quite sound investment as well. A case in point is Ietty, which is a Tokyo-based startup that runs an online platform for home-hunters. According to CrunchBase, the total equity funding of Ietty is $3.96 million in 3 rounds from 6 investors, the most recent of them is $1.6 million Series B on November 17, 2015.
According to Crunchbase, “The Ietty platform seeks to link property agents with home-hunters. Unlike conventional estate agents – who expect users to enter various preference criteria each time – Ietty pulls information from a user’s Facebook profile, which is linked to the platform. This allows agents to propose options based on criteria selected in advance. Users who then visit a property will receive a reward of JPY1,000.”
Top Players in Real Estate Tech in Japan
Companies in the Real Estate Tech in Japan can be categorized based on their area of activities and product.
Real estate websites:
Japan has many real estate websites that offer a plethora of services to homebuyers. Besides providing the listing, searching and transaction facilities, which almost every property site offers, they try to innovate and bring all services related to realty transactions under one roof. Some of the prominent websites are Japan Home Finder, Hakuba Real Estate, Real Estate Japan Inc, Plaza Homes, realestatelistings.jp, RealEstate.co.jp just to name a few.
According to Crunchbase, “RealEstate.co.jp is a multilingual home and property portal for Japan with a popular SAAS solution that serves some sites in the country. The site began by targeting foreign investors and home movers, building a series of tools and partnerships to serve that niche of the Japan market. It has since grown to be a leading platform for property listings and information.”
Other websites try to be different by offering services such as Documentation Preparation and Translation, Ownership Transfer and Registration, Property Renovation and Development, Comprehensive relocation services, Furniture lease, etc.
Internet of Things (IoT):
There are rarely any startups in this field, but there are Japanese home product companies or real estate firms which claim to use Internet of Things (IoT) for many housing solutions. They claim to contribute in sustainable and zero energy house development. They call it Home Energy Management System under which an owner can control the use of energy in AC, fridge, fan, etc. through an iPad application. One of such companies Daiwa House claims that its technologies can help reduce the emission of carbon by 70% when compared with any average household in Japan. A real estate developer Sekisui House says that it uses technologies such as artificial intelligence to make zero-energy houses.
Japan has some businesses that provide IT-based products for real estate market. One such firm is Itanji which is based on the mission of “to smooth the real estate transaction.” According to the company, “It is a technology company that provides the infrastructure of the lease transaction.”
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Its products include Bukkake (things you), which “is an automatic answering system of the property confirmation telephone for real estate management company,” and, Nomad cloud which “is a sale support cloud system for real estate brokerage companies.” It is installed with an automatic mail delivery function of property information and customer management (CRM) function.
Opportunities for Real Estate Tech in Japan
Despite significant progress in the field of realty tech companies, Japan still offers a tremendous opportunity for realty tech companies to offer many other services which can revolutionize realty sector. Culturally, Japan doesn’t encourage entrepreneurship and people are risk-averse. Even the financial system is very rigid and doesn’t support startup culture. Though things are changing for the last couple of years after the new government has taken over, yet a lot needs to be done to accelerate the pace of innovation in the realty sector.
Another factor which emphasizes the need for the use of technology in every sphere of life is the fact that the population of Japan is aging. The country needs technology more than any other nation in the world.
All these factors present a tremendous opportunity for realty tech startups as the country need technology to fight against the challenge of the aging population.
Way forward for Real Estate Tech in Japan
With growing real estate market, the prospects of Real Estate Tech in Japan are quite encouraging. Despite the economy of the country showing an unsatisfactory progress, real estate market is booming and that’s an excellent sign for realty tech eco-system in the country. With investment and VC funding coming forward to support the entrepreneurial activities, social compulsions creates an ideal situation for Real Estate Tech in Japan to breed and flourish.
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