Data insights to drive real estate transactions

Paloma Bautista

Traditionally, the real estate industry has taken investment decisions on a case-by-case basis based on limited data, such as that from transactions, property owners, or type of investment, and that from personal networking. The insights produced in this case-by-case model easily become outdated in a constantly changing ecosystem.

The current pandemic has impulsed digital transformation around the globe and forced the adoption of methods that deliver fact-based responses in a timely manner. Decisions based on outdated data and personal knowledge are not sustainable. We need to look forward, detect trends and understand how the world, its citizens, and their needs are changing.

“At the heart of CHAOS we believe that insights driven by demand — in other words, people — provide more accurate predictions and forecasts to support decision-making in real estate,” says Natalia Rincón, PhD in Smart cities and CEO at CHAOS.

Today, there is more than enough information that can be analysed together to better understand the performance of specific locations. Yet, the challenge that real estate professionals face is figuring out how to leverage data science for maximum impact, bridging the gap between scattered data and holistic insights.

Bridging the gap between data and business insights

In order to stay ahead of the curve in a fast-changing world, different players in the RE industry need to continuously monitor the market pulse.

“In addition to the traditional macro-level insights, actionable micro-level insights at a neighbourhood level are crucial to get a comprehensive market overview that enables sustainable decision-making,” says Valeri Tsatsishvili, PhD, Data Scientist at CHAOS

Data on its own is not enough. The usage of advanced analytics tools that, on top of mining timely data, provide a package of information capturing location and market state, and produce good predictions, can make a huge impact on ROI and profitability. To illustrate this, below we explain some examples from our experience in working with real estate investors and developers to provide such business impact.

Case 1: Identifying the investment opportunity – what and where to invest?

Advanced analytics can be used to support your market analysis with a quick yet detailed view of an area and its investment opportunities, including:

• Demographic forecasts and population density – The property demand of a specific location can be estimated more accurately by forecasting the changes in the demographics of the area (eg age, gender, income, unemployment rate, and generation cohort). It is also crucial to know how specific demographic segments are concentrated in the city and where your target client group is located (see Figure 1).

CHAOS Chart 1

 

• Market performance – The financial value of an area can be understood by looking at the average value of the transactions in the market and getting a quick overview of its rent levels (see Figure 2).

CHAOS Chart 2

 

• Attraction points – Understanding people’s daily use of the built environment will reveal what are the most vital places at micro level (activity hubs) where people are spending time outside working hours (see Figure 3).

CHAOS Chart 3

 

Case 2: Insights for a profitable rental property – measuring the attractiveness level of your property

During or after an investment has been done in a rental property, a closer look at the area helps to plan a long term profitable property. To maintain a high occupancy rate, a neighbourhood needs to be attractive. We suggest the attractiveness level of your property to be measured at least according to its location’s following parameters:

• Living Convenience – Matching the service provision, the reachability, and the type of tenant group lets you know how convenient to live in an area is.

• Growth opportunities – Under­standing how the area will develop in the future is a critical insight to help plan rent levels. CHAOS dashboards provide a growth level score based on the new and approved development by the municipality.

• Economic development – Healthy income and job opportunities are signs that a neighbourhood is experiencing growth. For example, a high-income area can indicate that its residents and those who want to become one have enough purchasing power to rent or buy high-class assets.

Big data insights and forecasts play a fundamental role in acquiring a comprehensive understanding of locations in relation to project feasibility

Predicting demand based on socioeconomic attributes at a neighbourhood level enables real estate investors, developers, architects, and other agents, to understand their property segment targets to better plan residential and commercial investments.

Moreover, understanding a location’s character and potential in support of your proposal will reduce the risk of your investment and development decisions. Measuring the current and upcoming competing property supply in the area and finding out how the area compares to other potential sites based on its accessibility, service provision, and attractiveness will enhance your project’s feasibility. 

Access CHAOS’ market insights and forecasts

www.chaosarchitects.com


Paloma Bautista (pictured), COO & Co-founder, CHAOS
Paloma Bautista provides leadership and vision to ensure the business has effective people, operational controls, and administrative and reporting procedures in place. She actively pursues sustainable urban development powered by technology, data, and people, as the key to creating liveable cities for everyone. She holds a Master’s in Architecture and worked for the consultancy company serving Spain’s Ministry of Development.