Real estate has long been considered part of the alternative asset class, often overshadowed by more mainstream investments like stocks and bonds.

Despite its critical role in the economy, real estate has historically been treated as a “stepchild” in the world of finance. This perception began to shift significantly after the internet bubble burst in 2002, when professional investors started to recognize the potential of real estate as a stable and lucrative investment.
One notable figure in this transformation is Larry Fink, the co-founder, chairman and CEO of BlackRock. Fink’s career and some of his most painful experiences are closely tied to real estate and mortgages. His insights and leadership have highlighted the importance of real estate in investment portfolios, yet the asset class still struggles to gain the same level of respect and attention as others.

The advent of new technologies, such as blockchain, initially positioned real estate as a key area of innovation. Blockchain promised to revolutionize property transactions, making them more transparent and efficient. However, over time, real estate has often been relegated to the status of a commodity, overshadowed by the more glamorous applications of blockchain in finance and other sectors.

One reason for this persistent underestimation is the relative lack of research dedicated to real estate compared to other economic disciplines. While there is a wealth of studies on stock markets, derivatives, and corporate finance, real estate research remains relatively sparse. This gap in academic and professional attention contributes to the ongoing perception of real estate as a secondary asset class.

Moreover, the financialization of housing has played a significant role in the housing crises experienced in many countries. Professional investors frequently purchase properties without ever seeing them, driven by algorithms and financial models rather than an understanding of the local housing market. This practice has exacerbated housing shortages and affordability issues, yet it receives surprisingly little attention in public discourse.

The undervaluation of real estate in the broader economic conversation can be attributed to several factors, primarily the complexity of the real estate industry itself. Real estate transactions involve numerous stakeholders, including developers, investors, regulators, and end-users, each with their own interests and priorities. This complexity makes it challenging to streamline processes and integrate new technologies effectively.

One significant issue is the divergence in interests between players in the real estate industry and IT developers. Real estate professionals often prioritize stability, long-term value, and regulatory compliance, while IT developers focus on innovation, efficiency, and scalability. This misalignment can lead to friction and slow the adoption of new technologies that could otherwise benefit the industry.

As mentioned earlier, blockchain technology has among others the potential to revolutionize property transactions by making them more transparent and secure. However, the real estate industry’s cautious approach to change and the technical challenges of integrating blockchain into existing systems have hindered its widespread adoption.

To address these issues, several solutions can be considered:
Enhanced Collaboration: Encouraging closer collaboration between real estate professionals and IT developers can help bridge the gap between their differing priorities. Joint ventures and interdisciplinary teams can foster a better understanding of each other’s needs and capabilities.
Education and Training: Providing education and training for real estate professionals on the benefits and implementation of new technologies can reduce resistance to change. Similarly, IT developers can benefit from learning more about the intricacies of the real estate market.
Regulatory Support: Governments and regulatory bodies can play a crucial role by creating frameworks that support innovation while ensuring compliance and protecting stakeholders’ interests.
Research and Development: Increasing investment in research and development specific to real estate can help generate more data and insights, leading to better decision-making and more effective integration of new technologies.

Real estate developers play a vital role in this process. Their work is not only about economic aspects but also about creating sustainable, livable communities. By considering social, environmental, and economic factors, developers can ensure that their projects contribute positively to society while also being financially viable. Real estate developers, with their unique position at the intersection of various interests, are key to driving this change and ensuring that real estate is recognized for its true value in the economy.

In conclusion, while real estate is undeniably a vital component of the economy, it continues to be undervalued and under-researched. The consequences of this neglect are far-reaching, affecting everything from housing affordability to the stability of financial markets. Addressing these issues requires a concerted effort to elevate the status of real estate within the broader economic conversation.