Why transparency works

Justin Mizzi and Bradley George Tayne

The real estate industry is undergoing a seismic shift driven by technology and evolving investor expectations. Justin Mizzi, head property valuer and advisor at Archi+, and Bradley George Tayne, co-franchise owner at Zanzi Prime, explore why transparency is essential for a competitive edge, how PropTech is revolutionising market data, and what Malta must do to adapt to the demands of a new generation of investors.

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A new era of investing

'A kid with a smartphone has more intelligent access to knowledge than the President of the United States 20 years ago.' Ray Kurzweil, 2014

Research from the CFA Institute and the Financial Industry Regulatory Authority Investor Education Foundation (2023) revealed some interesting findings about Gen Z's financial decision-making priorities and mindset.

The study examined Generation Z (1997–2012) in the US, Canada, the UK, and China and found that most Gen Zs aged 18–25 invest. Cryptocurrency often serves as their gateway into financial markets, and investing apps are their preferred method for managing investments and making trades.

Unsurprisingly, these findings suggest that we are on the brink of a profound generational shift, with this cohort entering the investment world and leaving its mark on all asset classes, including real estate.

As two professionals in the real estate sector, these findings prompt the question: Is the real estate market keeping pace with the changing preferences of this growing demographic, or is it at risk of alienating an entire generation of customers?

Setting aside the discussion on sustainability, ESG considerations, and other vital topics such as quality, affordability, and the democratisation of real estate through tokenisation and REITs—issues that have been thoroughly debated in Malta—this article explores how property technology (PropTech), data, and market transparency are evolving globally. We will discuss why transparency is good for business, what today's tech-savvy investors expect, and what Malta's real estate market must do to remain relevant, attractive, and competitive.

A call for clarity

"Once upon a time when markets were driven by a desire to be in a specific locality, the valuation adage was 'location, location, location.' This changed in subsequent recessions and downturns when the proliferation of bankruptcies led to the default of leases to 'covenant, covenant, covenant.' Today, where we are in a world of sophisticated investment decision modelling, I would suggest the adage now should be 'transparency, transparency, transparency'." Nick French, 2024

Investors' expectations and values are evolving rapidly in this increasingly digital world. The ease of investing on FinTech platforms such as Revolut and even Moneybase locally has led to greater financial freedom and literacy among Gen Z. These digital investing apps have transformed investing in stocks and commodities into a simple, accessible process, allowing users to invest smaller amounts.

This generation is accustomed to analysing real-time data at their fingertips and has become used to seamless, data-driven investment experiences. With a swipe, users can access market trends, track price changes, and review historical and actual returns, creating a smooth investment experience.

As financial literacy grows and people rely more on data-driven investment decisions, the real estate sector is under increasing pressure to adapt. This generation places ever-increasing importance on sustainability, innovation, authenticity, accountability, ethics, and efficiency. It expects the same level of simplicity and transparency across all investment asset classes, including real estate.

These developments are driving the need for the real estate market to become more transparent, which has far-reaching benefits for local and global investors, as discussed in a previous article published with this magazine (Issue 72: Data Matters—How can Malta solve its transparency challenge?).

What does a transparent market look like

Malta can learn from several success stories. The UK, for example, is one of several countries that sets an objective benchmark for real estate transparency, contributing to higher standards and healthier real estate markets.

The availability of market data in these transparent markets creates ample opportunities for PropTech, which is vital for market data to be utilised effectively. PropTech allows real estate investors and users to gather large amounts of data. Access to such data can increase efficiency by saving time and resources by centralising all relevant information, leading to improvements in the market and enabling more informed decisions.

Examples of these platforms include mortgage rate comparisons, iBuying options, and tools like Zillow's Zestimate. Platforms like Zoopla—which provide detailed information on historic property sale prices, rental yields, neighbourhood statistics, and market trends on a single platform—exemplify the benefits of consolidating data. They make information readily available and user-friendly, empowering investors to make confident, informed choices.

The local scenario

However, market transparency still feels like an unachievable dream for most property markets. While a vast amount of data is generated daily, most information remains incomplete in analogue formats, such as PDF documents. Additionally, many real estate markets have never excelled at collecting data systematically, hindering the ability to capture and consolidate it for better insights.

Malta is one of the many countries facing these challenges, as highlighted in the latest (2024) JLL Global Real Estate Transparency Index (GRETI), where Malta's position showed little to no improvement since the previous report (2022). The local PwC Malta report, 'A Focus on Real Estate Transparency in Malta 2024', also indicates significant room for enhancing transparency practices.

This is because the real estate sector worldwide is notorious for information asymmetry, lagging innovation, and resistance to change. It is an old industry with a tried-and-true formula: learn the market, establish connections, build a network, negotiate effectively, and close valuable deals. Market players repeat this cycle time and again.

Whilst we still believe that this human element will always remain a crucial part of what makes the industry appealing and that this formula is timeless, the way each step is executed must evolve. Traditional methods still dominating the market must make way for more dynamic, engaging, and technologically enriched strategies designed to appeal to this new audience.

Malta's existing 'traditional methods' of investing—with limited information and market data that heavily rely on asking prices, scarce use of PropTech, lack of standardisation, questionable advice and valuations, a lack of internationally accredited professionals, minimal use of explicit valuation methods, and inconsistent and limited details on property and location descriptions—simply must change.

"Because we have always done it that way" can no longer be an acceptable response. Technology is transforming industries globally, and the local real estate market needs to follow suit, as it cannot resist market forces forever. The consequence of failing to respond is an inevitable long-term decline. These changes are necessary not only for the sector to remain relevant and meet the expectations of a new generation of investors but also because we all deserve better.

Moving forward

Working in real estate—whether as an estate agent, architect, or other role—can be a great profession. One can have a purposeful and rewarding life working and investing in real estate in Malta, even without these vital technological and transparency advancements.

However, real estate in Malta must recognise the value of data and technology. Enhancing market transparency, consolidating data sources, and creating a centralised platform that can provide clear and comprehensive insights will help build trust, ensure the industry's long-term sustainability, and meet the needs of modern investors.

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