Artificial intelligence supports real-estate transactions
The new service Gate. Open!
A beta version of the of real-estate transaction platform Gate. was released by Leeways Inc. in March 2016.
Using statistical analysis, artificial intelligence and machine learning based on approximately 30 million real estate big data that Leeways possesses, Gate. can be used for more detailed, transparent real-estate transactions. It is an open platform for all of real-estate companies, property management companies, construction companies and estate agencies, not only property buyers.
The aim of Gate.
Real estate has a price and a value.
price means a price tag on the property, and the amount you would like to receive, or spend on the property. It is very clear to see and normally in the spotlight.
These days, companies that can estimate the contract price using artificial intelligence are appearing. They analyze and compare a number of conclusions of a contract cases and derive the price. For example, “because that apartment traded for ￥○○, and that one was ￥○○, this one should be ￥○○”
This technique doesn’t surpass the conventional sales comparison approach. The estimated contract price only tells you the price that the property is likely to trade at a this point in time.
However, Leeways believe that the most important thing for a real-estate transaction is not price, but value. If the price tag on an antique is 100 million yen and trades at that price, it does not necessarily mean it is worth that amount. It is possible that those who are unknowledgeable would price the piece of art at 1 million yen, while people who are knowledgeable would price it at 100 million yen.
Just like an artwork transaction, a real-estate transaction is likely to be a one-of-a-kind transaction. And because of this, people tend to hesitate when purchasing property due to the divergence between price and value.
Gate. illuminates the value of the property that you would like to sell or purchase using a combination of conventional statistical analysis and the latest artificial intelligence.
If based on value, rather than price, it is easier for purchasers to make a decision. For the estate agency, a high contract conclusion percentage can be expected from the increased transparency.
The aim of Gate. is to invigorate real-estate transactions by offering information on value to all relevant stakeholders. This way of thinking has not previously existed in the real-estate industry.
What is the value of a property?
The profit (cash flow) from a property has a big effect on its value.
Just like other assets, including shares and bonds, properties produce cash flow. Dividends from shares, coupons from bond, interest from deposits, and rent from properties all represent cash flow.
“Because this much rent can be expected in the future, and because it could be sold for this much money in ○ years, I should purchase it for ￥○○ if I want ○％ yield.”
The ￥○○ is the value of property assets.
While you can roughly anticipate the future cash flow of a bond or deposit, it is not so easy to do for property because you do not know how much rental income you will get during the time you own it, or how much you will be able sell it for in the future.
For example, the speed of decline in rental price differs between concrete structures and wooden ones due to time-related deterioration. Also, depending on rent trends and the future sales price, there may be cases in which the gross rate of return is higher in the suburbs, but overall yield is higher in the city center.
No real-estate company has been able to offer this kind of cash flow forecast up to this day.
However advances in technology have steadily reached the real-estate industry too.
Gate. works out the cash flow forecast using a self-developed artificial intelligence algorithm.
Offering a unique asset value analysis that goes one step further
One of Gate.’s distinctive features is providing high quality analysis for investment decisions.
The rent of a property is impacted by various elements that are complexly intertwined, such as the closest station, the time required from the station, exclusive area and the age of the building. Gate. uses machine learning on approximately 30 million of these real-estate data and rationally and transparently estimates the current and future rent.
There is the general index, MER (Median Error Rate), which measures the accuracy of the machine learning. Gate.’s MER of estimated rent is 5.8％, which is an industry-leading level of performance.
The reason why high precision is possible is because Leeways is a professional real estate company that has been handling properties for many years. Although the possibilities of artificial intelligence are unlimited, in the real world, we cannot perfectly rely on it with current technology. The real-estate profession is indispensable to breathe new life into artificial intelligence.
Another of Gate.’s distinctive features is that it uses statistical analysis and can numerically express the specific characteristics of the properties that you are examining to purchase.
When you would like to know how much the decrease in rent would be if the room was one minute further away from the station, or one year older, Gate. can determine a specific numerical value.
Expecting further progress
Gate.’s artificial intelligence is continually learning and the statistical analysis keeps evolving day after day.
Gate.’s real estate technology holds the promise of innovation to change real estate transactions in the future.
If value becomes more decipherable, the transparency of the transaction will increase. If transparency increases, people who have been hesitating will transact. The activation of the real estate transaction has big advantages for buyers, sellers and agents.
The new gate of real-estate transaction has just opened by Leeways’ Gate..
Expectations grow for further progress in real-estate technology.
Gate. currently is available only in Japanese. The English and Chinese versions will be released this summer, 2016.