Description of the real estate market
The main market of the XP group is the real estate market in the Czech Republic. In 2020 and 2021, the Central European real estate market and internet services using data from the real estate market for the European Union.
In the Czech Republic, the economic activity of the XP group focuses on the following areas:
- elaboration of expert opinions on property prices. It is a market consisting largely of demand given by legal requirements (insolvency and execution proceedings, inheritance proceedings, litigation). The extent of this is the number of inquiries made by expert opinions in the order of tens of thousands a year. The valuation of real estate for the purpose of providing a mortgage loan is separate.
- real estate professionals – they need accurate data on property prices for their work, with the development of digitization these data are delivered almost exclusively in electronic form. It is a group of 5-10 thousand users of electronic systems in the real estate area.
- a crowd service, that is, an ordinary internet user who is interested or in need of an information service or services in areas where we collect data and provide Internet services. These are hundreds of thousands of users per year.
European and Global Market:
According to calculations by global consulting firms, the theoretical value of all real estate in the world is around 230-250 trillion USD based on recent economic developments. This value represents approximately 60% of world assets. The whole area consists of commercial and residential properties, forest and agricultural land.
Residential real estate accounts for the largest share of this value, around 75%, which is around $ 170 trillion. This property is divided between approximately 2.5 billion individual owners and represents the largest part of the value of the personal property of ordinary people. The European space our project is targeting in the first steps also contributes around 20% of the total value.
However, these figures are theoretical values, most of the properties do not enter into business relations in the real estate market. Under business relations, sales and rentals for commercial purposes and residential housing can be imagined. In the pan-European real estate market, approximately 70-80 million transactions are made annually, bringing market operators around $ 700-800 billion.
Real estate market trends
- Growing demand for own housing, continued urbanization
According to the United Nations’ global statistics, around 50% of the population currently live in urban areas and this forecast will increase to 65%. From a commercial point of view, the possibility of spreading and localizing the activities outside Europe is very interesting for the development of XP group Internet applications.
- The growing number of real estate transactions through brokerage services
The commercial potential of XP group services lies in the ability to sell add-on IT products to real estate agents and brokers, real estate valuation by direct sales, and offering additional affiliated services (financial, legal, construction, etc.).
- The role of financial institutions in the real estate market
Most often, financial institutions provide funds for the purchase of real estate. The property then serves them as collateral for the money provided. In addition, there are investment funds that specialize in the operation of mainly commercial real estate. For all of these institutions, evidence of real estate prices and predictions of their development are essential to their decision-making, risk management, profitability and stability. Developing business group applications to meet their needs are potentially very attractive to them.
- The ongoing civilization revolution, digitization
With the digitization and development of IT and the Internet, previously stable areas of human society are changing – transport (promotion of disruptive companies – eg Uber, Lyftago and others, self-driving means of transport), accommodation (shared housing model and short-term accommodation – eg Airbnb) IT is growing rapidly (increasing computing capacity, cloud computing, artificial intelligence), health (gene sequencing, individualization of therapy).
The majority of the population is unable to figure out the impact of current socio-economic and demographic phenomena on the value of their assets, or quantify them for a large range of relationships and lack of aggregated data.
From the marketing point of view and the market use of INEM and its other applications, which offer data that is nowhere available, this interest is the basis for monetizing the outputs of the XP group projects.
Current activities of the business group
In 2018, XP group a.s. was established as the parent and leading company of XP invest, s.r.o.
XP invest, s.r.o. was established and operates in the area of real estate valuation since 2008. Created and operated by www.odhadonline.cz, which provides orientation estimates of real estate based on information submitted by the client via the Internet interface in the Czech Republic, information service on demographic, economic and other parameters of municipalities and housing in the Czech Republic. Since 2010, she has been using her employees to prepare expert opinions for clients.
The preparation of expert opinions represents the prevailing part of the economic activity of XP invest, s.r.o. Thanks to the activity of management, efficiency and emphasis on the use of computer technology in the area of real estate valuation, the growing number of clients is satisfactory, according to internal statistics for 2016-2018 it is between 65-75% repeated submissions of reviews and returning clients.
In the past years, the INEM system was developed, which provides extensive and information services to the professional public in the area of real estate valuation. INEM acquires and stores real estate market data from all over Europe over the long term, falling within the scope of Big Data. Information on property prices is supplemented by INEM data on living conditions – crime, demography, local economic conditions, clean environment and morbidity, transport accessibility and economically active businesses.
The main advantage of the INEM system is the ability to automatically evaluate online, fast, and especially any standard property (apartments, houses, land, apartment buildings, etc.) in Europe. As we monitor the European markets in the long term, we have time series of developments to individual types of property in most European locations.
Currently, the INEM system is not only used by XP invest employees and their partners. Despite its early version, the system is used by dozens of private appraisers and experts from all over the Czech Republic.
Future development and business plan
In the real estate business, the XP group will focus primarily, but not exclusively, on residential properties (flats, family houses) and land. The outputs of the developed applications will allow identification of commercially attractive properties and subsequent transactions with them.
For 2020-2021, the XP group intends to establish additional subsidiaries or subsidiaries in Central European countries, in which activities for language and content localization of developed applications, marketing and monetization will be carried out.
Developed applications mean parts of an already developed INEM system. Another goal of the 2020-2022 business group is to create an innovative analytical-prediction system called Predict INEM, which will evaluate the links between socio-economic, demographic, environmental and property prices. They will be able to model and indicate appropriate solutions in the field of municipal projects and activities, showing their impact on the prices of residential, business and municipal property.
The individual layers of information will then be structured to provide users across a range of free services through subscription-based services to large-scale bank and mortgage analysis systems.
The ultimate goal is to create a globally exponentially growing platform with market-based use of real estate data.
- The basic layer of the information layer is created as a free service. The XP group management will take steps to increase traffic, enabling monetization of this service through click-through advertising on individual sub-pages. Furthermore, by gaining leads – contacts to clients who place a demand for information-related services.
- Individualized information outputs – estimates and advanced simulations for specific properties, advice, etc. The use of micro-transactions is expected for these services. Furthermore, by acquiring leads with a greater focus and success in monetization, assuming the user’s consent.
- Real estate market professionals
- Forensic experts, appraisers in the fields of pricing and real estate estimates, real estate agents are already largely serviced by the INEM system, which is able to give them information about current property prices. Monetization is through time packages to access the INEM system.
- Financial institution
The Predict INEM system will be able to use the result of the valuation in the INEM system automatically, to evaluate the property individually, to provide information on the expected development of the price of such property. An individualized module for the needs of a given financial institution will enable them to accelerate and streamline the provision of mortgage and other financial services, reduce the risk of non-performing mortgages and loans. Monetization is anticipated through subscription for personalized modules.
Here is the assumption of personal involvement of the XP group management in acquiring individual clients, with the sale of a tailor-made system in the order of tens of millions of crowns and license and service fees in the range of tens to hundreds of thousands of crowns per year per client.