Predictive analytics is transforming the face of the real estate industry. Historically, conventional analytical methods and data sources in this sector have made it challenging to harness data for quick, actionable insights. However, new and unconventional data sources are emerging to identify valuable patterns, benefiting both real estate professionals and consumers.
The impact of big data on real estate is massive. According to Dave Garland, Partner, Second Century Ventures and Director of Strategic Investments for the National Association of REALTORS®, “Predictive analytics is analysing extracted data, using old data to predict the future. The big difference now is we have new data points that we can apply to our industry. We’re moving from the idea of hindsight to insight to foresight.”
Mark Choey, co-founder and CTO of Climb Real Estate noted that predictive analytics can help starting with the basics. “The No. 1 question people ask is, ‘Should I buy now?’ or ‘Should I sell now?’ so arming agents with data and historical context is important. When we get leads, the No. 1 thing an agent asks is, ‘Who is this lead?’ These types of new tools out there can help figure out who these people are.”
Here’s how predictive analytics will change the landscape of the real estate sector.
Enhancing the house hunting experience
Most home buyers begin their property search online. They typically don’t reach out to a real estate agent until later in the process. By leveraging predictive analytics, agents can use consumer data to understand the buyer’s journey over time better. They can pinpoint consumers who are in the market to purchase a home and reach them with the right message, at the right time.
Similar to Amazon’s predictive recommendations, real estate search portals could implement the same concept, offering a carousel with property suggestions that might appeal to interested buyers.
Additionally, property matching has the potential to show buyers homes that match their lifestyle instead of their search criteria. This can introduce consumers to new types of homes and neighbourhoods they may not have considered otherwise.
Property matching can reduce the number of days a house sits on the market and save buyers the time of sorting through hundreds of property listings.
Finding the best investment property
Successful real estate investments require reliable data to make informed investment decisions. Using predictive analytics, investors can easily find the perfect investment property.
Location is a significant factor when looking for a lucrative investment property. Predictive analytics helps investors to choose the best place for their investment properties. For instance, heatmap analysis of areas within a particular city can help investors identify the best neighbourhood for rental property investments. Even if they aren’t familiar with a community, they can use heatmap analysis to find the best area based on metrics such as property value, rental income, and occupancy rate.
Predictive analytics can also show real estate investors the essential features of the most valuable properties in a particular housing market. For example, predictive analytics may show that to get the most return on property investment, a townhome with two bedrooms would be an optimal choice in a particular neighbourhood.
What’s more is that this technology is advancing so much that it can forecast trends in the market as well. Real estate investors always want to buy properties for cheap in up-and-coming neighbourhoods. The problem has been figuring out which neighbourhoods are improving and which still have a ways to go. Big data can potentially make these recommendations based on historical data and current investment trends. And being ahead of the market is key for any investor.
With predictive analytics, real estate investing is no longer just for experts. Technology is now making it accessible to those without a real estate background or financial knowledge.
Calculating the value of home renovations
According to RISMedia’s 2017 Real Estate CEO Exchange, the most indispensable predictive analytics tools five years from now are those that help agents communicate on a deeper level with clients about property condition.
Home improvement ROI is a hot topic that potential sellers often want to discuss with agents. Understandably, sellers want to know how finishing their basement or renovating their kitchen will impact the value of their home. Predictive analytics has the power to shed light on this area.
By analysing the upgrades and improvements of local homes, predictive analytics can identify what kind of properties local buyers are willing to pay more for, or the condition they expect at a specific price.
Armed with this valuable information, agents can recommend specific home upgrades or renovations that allow sellers to earn more at closing. Plus, agents can give this information to sellers early on so they have the time and budget to make necessary improvements.
Planning new development sites
Despite the level of research that goes into choosing a new construction site, it’s challenging for homebuilders to figure out why a development may sell better than another that’s similar. The answer lies in the data.
Predictive analytics could make it possible for home builders to identify the patterns of successful local developments and work to reproduce those results.
Additionally, builders could analyse in-demand property features and design homes that include these features, expediting the selling process. Not all new technological upgrades are popular, so big data can provide information on what consumers demand in order to install the best selling features.
Advancing the future of the real estate industry
Predictive analytics is barely scratching the surface of the real estate sector. However, the impact of this technology is apparent across the industry. There’s no doubt that predictive analytics will drastically change the landscape of this market in years to come for residential and commercial real estate and on both the buying and selling side. Understanding how this technology works and its potential is crucial moving forward. Investors and agents alike are starting to pay attention in order to not lose out to competition. Predictive analytics tools are also becoming so commonplace that they’re no longer just in the hands of data scientists; this technology is growing in accessibility which is why it will change the real estate market even faster.
Adrian Fisher, Founder and CEO, PropertySimple