The construction industry is suffering from a serious lack of data. Can blockchain help?
Behind schedule and over budget is normal. Clearly, there's a problem that needs fixing.
Real estate valuation is an ongoing issue in the property market. It can be expensive for sellers and valuations can vary widely, sometimes by as much as 20% between online and in-person agent valuations. Plus there are different results from bank and market valuations, and the most correct result is largely dependent on a range of very local factors, which can vary between neighbourhoods and often won't be considered in formal evaluations. Developers are running into similar problems, with a lack of reliable data driving up costs, often extremely sharply.
This issue might be a sticking point in the age of asset tokenisation, where the goal is to fractionalise and turn assets of all kinds into a highly liquid form that can be easily moved globally. Unfortunately, accurate valuation is still elusive and depends on a very local take. At the same time, it's also a sharp cost that crimps the idea of making these future markets highly accessible.
It gets even more complicated when you consider the needs of different players in the space, and the different ways they'll come up with price tags – there are renters and buyers trying to come up with a price that suits them, banks trying to manage mortgage risk and insurance companies trying to square valuation with risk factors.
These different parties have different data needs. For example, someone who wants to rent out their home could benefit from information on rental price variation throughout the year. Or a developer might want geographic information regarding their site, future land prices and anything else.
But getting this kind of data can be extremely expensive and difficult, and it's not always accurate. This can result in extreme follow-up costs, such as the need to change designs partway through a project or undo work already done.
Depending on how you measure it, this data access problem can be seen as actually getting worse, with the construction industry and its scattered participants being relatively slow to embrace disruptive technologies relative to other industries, the McKinsey consulting firm notes. These days, it says, the new normal is for large projects to take 20% longer to finish than initially scheduled and to go up to 80% over budget.
"The industry has not yet embraced new digital technologies that need up-front investment, even if the long-term benefits are significant," it notes. "The construction industry is ripe for disruption."
Japan-based DexisChain is one such disruptor, aiming to approach real estate tokenisation and data management holistically by building in a crowd wisdom tool to hopefully provide more seamless and accurate valuations as well as integrating machine learning and other data management systems to keep adding value.
"Real estate is low liquidity because of regulatory barriers so we thought that using tokens will solve this problem," says DexisChain director Nobuo Takaki.
But information access remains a key problem.
"One of the key barriers that exists in the real estate market is information access. Due to highly localized factors affecting the outlook for any given property development project, smaller investors struggle to get reliable data on underlying assets. There is currently no easy way to acquire such information without either paying for expensive professional appraisal and due-diligence services or relying on advisory products such as research newsletters," a DexisChain press release explains. "Real estate investing regulations are also prohibitive and limit the potential pool of investors while investment size restrictions price out the vast majority of interested investors. DexisChain seeks to resolve this worldwide information inequality though the application of blockchain-based predictive markets, coupled with a machine learning and modeling layer to generate affordable, reliable and actionable investment data for the real estate space at all levels of investing experience."
"We will launch beta service of Dexis in mid-2019 and after gaining many users, we will launch the official platform in 2020. We believe that we will become the key service for the real estate market," Takaki says.
Crowd wisdom is a relatively well-trodden path both inside and outside cryptocurrency, and properly managed, it might stand to be a powerful tool for helping solve current informational problems.
This isn't quite as straightforward as asking people to bet on the future value of a property, or place a wager on how far over budget a development project might run, although that might still bring some surprisingly accurate insights, but will instead be largely geared around a data marketplace system to help democratise access to data, even the playing field and bring the correct information to the right parties where needed.
The idea is that different parties will be able to rent the highly accurate data from data scientists when they need it, and that these models themselves will also be aggregated and fed to a real estate prediction AI to teach it and improve accuracy over time.
Data is the lifeblood of Internet 4.0, and where data analysis is needed, you'll inevitably start finding AI. The real estate tokenisation platform will work alongside this data marketplace to hopefully create an effective end to end, top to bottom, start to finish solution to the data crunch currently afflicting real estate.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.
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