The real estate market has frequently been the victim of recession, and as a result, investors have not always viewed the industry as a priority. However, as the world evolves and the demands of society changes, real estate is beginning to emerge as a prime investment opportunity for venture capitalists. What’s at the root of this development?
For starters, the economy appears to be on an upswing. As of 2017, around 50% of homes were now either as valuable or more valuable than they were before the recession struck. This makes for prime investment territory, as venture capitalists feel they have room to profit.
Much of the change is also attributed to the lifestyle differences of millennials. As they graduate and leave home, younger adults are more inclined to seek shared or temporary housing through companies like Pillow and Starcity to cut back on living expenses. The number of homeowners in the U.S. has decreased due to factors such as acquiring increased student debt and holding off on starting families. With an increased interest in rental properties, landlords and homeowners now have more reason to provide better amenities and reasonable costs to appeal to their potential renters.
Historically, the real estate industry has been decidedly low-tech; that is to say, relying on specialized software and online resources have not been effectively utilized. In an article for TechCrunch, Joanna Glasner writes that it is estimated that real estate agencies have “spent less than one percent of revenues on IT,” and she suggests that there is ample room to grow in this area. With real estate startups that operate primarily online like Airbnb, making use of this opportunity for growth and audience expansion is natural and beneficial.
While it may still seem as though the real estate industry is suffering from a recession, venture capitalists continue to invest in startups, and the market of rentals, shared housing, and temporary lodging continues to grow. Whether we will see a more significant decrease in homeownership and an increase in shared housing in the future, however, remains to be seen.