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 key difference between the US and Australian property markets is how financing risk is distributed.

In the US, the government steps in to ensure people can repay their loans, while investors bear the risk of interest rate changes. In Australia, the banks hold the risk of loan defaults, but borrowers are responsible for paying interest themselves.

The Australian market tends to be more regulated, which leads to greater stability and predictability. The US, on the other hand, is a much larger and more dynamic market, with a wider range of players and more room for innovation.

This difference can work in favor of Australian companies looking to expand into the US—they're often viewed as more mature because they've navigated stricter regulations.

However, entering the US market comes with its own set of challenges, like higher competition and the added complexity of dealing with currency exchange rates. Competing in the US can be expensive, but the potential rewards are significant if you can navigate these hurdles.

Similarities between the US and Australian property markets

Both the US and Australian property markets are grappling with similar issues: limited housing availability, rising costs, and skyrocketing home prices. As the cost of homes continues to climb, it's becoming increasingly difficult for people to afford to buy or even rent.

A variety of factors contribute to this—zoning laws that restrict development, shortages of skilled workers to build homes, and the growing impacts of climate change.

Climate change is exacerbating the problem, with extreme weather events threatening not only homes but also the wealth tied to property. Natural disasters can destabilise entire regions, making it harder for people to invest confidently in real estate.

During COVID, many people in both countries took advantage of remote work to move away from major cities. This surge in demand for homes in less populated areas led to an unexpected rise in prices, adding further pressure to housing affordability.

At the same time, the need for accurate, fast home valuation technologies is growing. In both Australia and the US, people are looking for better ways to assess the true value of their homes, especially in volatile markets.

These technologies could be key to navigating the future of property in both nations.

Challenges facing US proptech

The outlook for the US real estate sector is more pessimistic compared to Australia, driven by several factors:

• A constrained supply of residential housing,
• A bifurcated market with stark differences across regions, and
• Difficulties in raising capital for proptech companies.

These challenges have created a frustrating landscape, marked by the combination of low fixed-rate mortgages and the stark contrast between vacancy surpluses in some cities and shortages in others.

Proptech companies in the US are particularly feeling the squeeze. Raising capital at fair valuations has become harder, and investors are now pushing for shorter timelines on cash burn. With low unemployment, these companies face a tough choice: either pay more to attract talent or drastically cut expenses.

Despite the "doom and gloom" sentiment in the sector, there are opportunities for those bold enough to act. Mergers and acquisitions in the proptech space could provide significant upside, and transformative technologies like ChatGPT and GPT-3 are poised to reshape the industry for those willing to invest in innovation during uncertain times.

Expanding into the US market

When launching into the US, the most important thing to remember is that revenue rules. You can't just sit back and hope sales will happen—you have to be on the ground, figuring out the market.

The US isn't one market; it's a patchwork of different ones, even within the same state. Take California: the way people buy in San Francisco isn’t the same as in Los Angeles. You need to get specific about where your customers are and what they care about.

To drive sales as a founder, immerse yourself in the market. Learn how your customers think and buy, and position yourself where you can best connect with them.

Learn more about what Proptechs in the Stone & Chalk community are doing to drive change within the Australian ecosystem.