Hong Kong´s role as a bridge between East and West is an essential part of its history and the defining feature of its economy. This superconnector role involves all industries and verticals and PropTech is no exception. In its efforts to help develop the local ecosystem, the HKPTA has been developing various collaborations with other economies seeking synergies and opportunities for growth.
A good example is in the links it has been developing with European institutions, associations, startups and other players of the ecosystem. European markets represent a very important opportunity for expansion for Hong Kong startups and vice versa, strengthening ties between both sides will benefit both. When looking at European markets, a few features stand out:
Many of the trends dominating PropTech in Europe are very similar to those we can observe elsewhere. There is a race to develop and implement solutions in: AI & Machine Learning, Big Data & Cybersecurity, Blockchain, Metaverse & Virtual Real Estate and Smart Homes / Smart Cities. However, when we look up closely, each side tends to have a different approach. Asian PropTech startups tend to focus on solving pain points and inefficiencies in the real estate industry, things like data transparency, transaction speed, and customer experience. On the other hand, European ones tend to focus on enhancing existing processes and services, such as smart home technology, property management or sustainability. These differences mean that both ecosystems are compatible and present opportunities for synergy.
Another notable trend in Europe is that despite presenting a fragmented landscape, with differences in language, purchasing power and market focus across markets, investment in European PropTech had been experiencing very strong growth up until 2021. According to Sifted (a European Tech Magazine) 2021 was a record year for European PropTech, with VCs investing €3.8bn in the market, a 350% increase compared to 2020.
Since then, a variety of shocks to the economy have altered the playing field across the world. The effects of COVID have been a catalyst for change, accelerating digitalisation and shifting the priorities of industry players but they have also had a very negative impact on the economy overall. This, combined with the war in Ukraine and changes in macroeconomic conditions (a higher inflation and higher interest rate environment) have reduced the rate of growth and cooled down the investment environment. This new situation presents greater uncertainties, however, despite these shocks PropTech continues to grow significantly faster than the overall economy and is expected to perform strongly in the years to come.
Another notable trend is the EU´s notorious preference for being a leader in regulation. Europe is focused on becoming the first climate-neutral continent by 2050 and is taking steps to make it a reality. European institutions have been setting deadlines for various sustainability transitions, with serious consequences for those who don’t comply in time. This creates vast market opportunities for any startup that can help incumbents reach the new sustainability goals, especially those related to the carbon footprint.
This push through regulation is complemented by a variety of subsidies and other European programs. Perhaps the best example of this is the NextGenerationEU program, defined by the European Union as: “the EU’s €800 billion temporary recovery instrument to support the economic recovery from the coronavirus pandemic and build a greener, more digital and more resilient future”. It is worth noting that these funds are available to all European companies and that, according to European law, if a foreign firm sets up a new entity in en EU member state, this new entity will be treated as a European Company, with all the associated advantages meaning that Hong Kong startups have a pathway towards having a full participation in the European ecosystem.Last but not least, European standards are typically among the most stringent in the world in a variety of fields, from data protection and privacy, to sustainability, to quality controls. For a startup, being able to adapt to this environment is a mark of excellence and a catalyst for high quality innovation. Once a startup can reach European standards, meeting regulatory requirements elsewhere is typically less daunting.
European markets present excellent opportunities for Hong Kong startups but the reverse is also true. Asian markets represent a huge opportunity for European startups. Sadly, so far they have mostly been unable to tackle them. Hong Kong with its sophisticated built environment, increasing demand for PropTech solutions and links throughout the region can play a vital role in resolving this deficiency.
Overall, there are many potential synergies between Europe and Asia in PropTech with Hong Kong at their centre, and collaboration between the two regions could lead to significant growth and innovation in the industry. In order to facilitate these synergies, the HKPTA has been pushing forward with various initiatives.
Last year the HKPTA reached out to the European PropTech Association to discuss possible collaborations. The first initiative was a seminar where their chairman kindly provided an up to date comprehensive view of the PropTech landscape in Europe. The seminar was a success and set the stage for future collaborations.
In a similar line, the Investment Committee of the HKPTA, of which I am a member, organised a bootcamp in collaboration with the city of Barcelona in Spain. In this one-month intensive program, launched in conjunction with ACCIO and Tech Barcelona, four Spanish startups received one-on-one weekly mentoring from Hong Kong investors, market experts and operators to help their teams better understand the local market and improve their pitching. The program concluded with a Demo Day in which the teams pitched to many of the top local PropTech investors, the feedback was excellent and the HKPTA is already working on repeating this format to connect Hong Kong with other ecosystems around the world.
Also, since its inception, the HKPTA has been negotiating preferential access for its members to various European PropTech events, paving the way for greater exchange and collaboration. We look forward to being able to report numerous success cases in years to come.