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Qualitative report : Economic background and key e-business
(Oct. 2002, pdf, 2.1 MB)
(May 2003, pdf, 1.6 MB)
Real estate activities belong to the service sector and are distinct from construction activities.
The real estate sector (RE) in the EU-15 comprised around 755,000 companies in 1999, and provided jobs for about around 1.7 million people. The RE is characterised by a very high proportion of small companies, around 75% of them are run by a self-employed person with no employees, compared with a service sector average of around 50%. 98% of real estate companies have less than 10 employees. (Eurostat/DIW 2002)
RE services are not a high-tech industry, and application areas for e-business are limited by the nature of the business. The overall ICT intensity is low in comparison to other sectors.
The focus of e-business applications differs between the various stakeholders and sub-sectors:
For housing companies, e-business applications can support facility management tasks such as: client data administration, e-mail correspondence with tenants and owners, and bookkeeping. Service applications can support maintenance, cleaning and remote control of facilities. Such services can be integrated into an Internet-based customer care centre, beneficial for both the administrators and the tenants.
Basic ICT infrastructure is widely available in RE companies. Internet access is commonplace, even amongst small firms, and about 60% of companies have a website. Surprisingly, small firms are more likely to let customers buy property directly on the Internet (15%) than medium-sized and large firms (10%).
More sophisticated e-business applications, such as Customer Relationship Management (CRM) are used by a few large companies only. Furthermore, online procurement is not as relevant for RE companies as for firms in manufacturing sectors, which have to manage a supply chain of physical goods.
The opinion of many leading market players is that ICT and e-business will neither have a remarkable impact on real estate business, nor on supply and demand.
RE activities may be considered as a typical sector in which, due to the nature of the products and services offered, particular parts of the ideal e-business sequence are of limited practical importance. In fact, the ICT intensity is lower than in other sectors for all comparable dimensions. The small size of the average real estate agency partly explains the limited applicability of ICT, for instance, for internal work processes.
However, a major impact of the Internet has been to dramatically increase market transparency in this sector. This is a similar trend to that experienced by the tourism, and to some extent, the retail industries. Prior to the Internet-era, the RE market was characterised by a particular lack of transparency. Information about the supply of properties was often poorly structured and dispersed across many sources. Would-be purchasers and tenants therefore, had difficulty finding the required information.
As in tourism, the Internet can have both disruptive and harmonizing effects on the market. Web-based brokers are either acting as real estate agents themselves (thus becoming competitors to established firms), or trying to attract real estate companies by promising to put them in contact with individuals looking for housing.
For SMEs, the Internet offers particular opportunities in this sector, as they can potentially compete on a level footing with firms of any size in marketing their property. This was not possible in the pre-Internet era.
There is no clear and immediate need for policy arising from e-business impacts in this sector. A worthwhile avenue could be to encourage real estate associations and public entities to form public-private partnerships in order to conduct pilot projects to develop e-business technology in the real estate sector.