The Dubai government's plans to create a digital real estate platform to oversee sales and rental transactions by 2020 will reduce the need for ‘pure’ brokerage services and force agents to up their game, industry experts said.
“While the new smart system has been positively received by the market, it could have a negative impact on the residential brokerage industry, reducing demand for agency services and even the number of agents in the market,” said Mat Green, head of research and consulting UAE at CBRE Middle East.
The Dubai Land Department last week unveiled plans for a digitised platform based on blockchain ledger technology, called Real Estate Self Transaction, or ‘REST’. The system will enable “the complete digital management of real estate transactions, eliminating paper documents and reducing brokerage procedures,” the department said.
The new platform is part of the Dubai 10x initiative, which aims to place government entities 10 years ahead of the rest of the world in all sectors, including real estate. It is a key plank of the UAE’s plans to advance its digital economy and further diversify from oil.
The new platform will require real estate agents to “up their game and demonstrate how they can add value to their clients by negotiating a better deal than they could get themselves,” said Craig Plumb, head of research at consultancy JLL Mena.
The UAE property market has suffered a slowdown amid the three-year oil slump, which led to cutbacks in government and consumer spending and slashed sales and rental prices. With the market forecast to decline further in 2018, the government has sought to encourage greater investment by removing bureaucracy.
As well as storing sales and lettings documentation online, DLD’s platform will offer other features that remove the need for third parties including: linking buyers with mortgages; enabling landlords to pay utility and service charges via the system; commission interior designers to decorate a new-build unit, and appoint property managers to look after the asset for a remote investor.
“This poses a potential threat to the role of ‘middle men’ such as brokers and agents,” Mr Plumb said. “The better agents will adjust and survive, while the less able and professional will be replaced by new technology.”
The system will be a game-changer, said Mr Green, particularly for the completion of off-plan transactions which are inherently less emotional. However, when assessing a completed asset, investors or end-users may view multiple properties and require more detailed advice.
“Clearly the traditional role of a broker is evolving, driven by new technology and changes to the real estate environment, which are reducing demand for pure brokerage services and increasing requirements for more strategic consulting,” he said. “While REST will be a major disruptor and likely reduce revenues for many brokerages, there is still a role for agents in the process.”
Dubai-based brokers said they felt little threat from DLD’s plans.
“In this case, the technology won’t replace or reduce the role of the broker, but facilitate a deal once it has happened,” said Lewis Allsopp, chief executive of Allsopp & Allsopp.
A property will still need to be marketed professionally and viewings arranged, and agents will need to provide advice to clients about the local area and market conditions, and facilitate cross-selling with other agencies. “The broker needs to be able to negotiate a deal to the satisfaction of both sides,” Mr Allsopp said.
Nick Grassick, managing director of PH Real Estate, said any system that reduces the time, cost and complexity of a transaction is a “valuable tool”. “The proposed platform is an amazing idea and proves the UAE is committed to advancing the property sector,” he said.
The problem solving, communication and negotiation skills of an experienced agent, as well as their understanding of the local market, “will only be perfected by the platform”, added Haider Tuaima, head of research at services firm Valustrat.