Artificial intelligence, machine learning and data analytics are just a few of the innovative technologies that have been rapidly changing the way in which industries operate. Predictive analytics is no exception. However, a recent KPMG survey suggests only 5% of real estate firms have pushed efforts in this field. Our Investment Analyst discusses predictive analytics and what this transformative technology will bring to the property industry.
Many businesses across different fields have begun to implement the use of artificial intelligence and machine learning to add value or gain a competitive advantage in their industry. In the property industry, firms are utilising AI technologies to analyse the vast quantity of data collected to better understand and make decisions in the market. Predictive analytics connects data points — both historical and real-time — to allow firms to make the quantifiable decisions and form future predictions on client and market demands.
With more public and private businesses creating and collecting data on market changes, the volume of data affecting the real estate market continues to grow rapidly. Machine learning provides the framework to analyse these large datasets, identify key patterns and make considered decisions. What data is collected, and how it is used, is dependent on the company and what businesses are trying to achieve.
With regards to tenant analysis, most customers will look at a business’ website long before contacting the business directly. There they leave virtual footprints, which indicate what they might be looking for. By analysing this data, companies can segment users who visit their website. This information can be used to build customer profiles, incorporating preferences and behaviours to predict future needs. High-value customers can be identified by their behaviours online, improving the efficiency of targeting efforts.
Information collected by predictive analytics tools allows firms to offer a more tailored, personalised experience — suggesting properties that may be of interest or similar to properties they have viewed online. Like streaming services recommending programmes you may enjoy based on your previous choices! These tools can also be used to match properties to customers based on their lifestyle, rather than what they have been searching for previously. This can cut time spent looking for a property that may not be appropriate for the client’s needs.
But predictive analytics, has more to offer than simply knowing your customers. It can also be used to mitigate risk through the following:
Forecasting future trends
Predictive analytics can be used to forecast market trends. Successful enterprises of the future will harness tools such as artificial intelligence algorithms to produce analytics which can help forecast the types of properties that offer the best return on investment.
It does this by determining which features of a property are most important in that location. Real estate firms should be using predictive analytics to monitor for trends that will affect their clients and business such as early indicators of a housing downturn or the acceleration of property prices. The data exists — it is those who learn to mine it in a meaningful way that will be the most successful.
Identifying profitable investment opportunities
Predictive analytics can be used to help investors select the right property. Property management companies can utilise heatmap analysis to determine optimal locations for property investment. Location is a factor that can impact heavily on the success of an investment opportunity, and heatmap analysis can be used to predict which areas are ‘up and coming’ and therefore a worthwhile investment. Heatmap analysis factors in rental income, property prices and rate of occupancy to determine the most lucrative investment locations. Early indications of a trend in prices will deliver significant ‘early mover’ advantage to the savvy investor.
Accurate Property Valuations
Property developers can use predictive analytics to estimate the value of properties and evaluate whether improvements made to the property will increase the valuation. This is done by identifying properties that customers are willing to pay a higher price for and by comparing the condition of properties against prices paid. The decision on whether to renovate can then be judged against the cost involved in the home improvements versus the price buyers are willing to pay for such improvements. This kind of ‘value add’ service will help distinguish the future-proofed property developer, harnessing the best tools of modern technology from those who have not yet made that technological leap.
Without a doubt, predictive analytics will transform the real estate industry in the years to come. To find out more about how Grayling Properties can utilise it for your benefit, contact our Property Management Team at info@graylingproperties.ie
Read our recent piece in The Irish Times on the future of cities.