Hey millennials, thinking about buying a house?
One of the greatest challenges millennials face, aside from record-high levels of neurosis and a collective sense of bewilderment, is lack of property ownership. Many of us find that as we reach our late twenties and mid-thirties, despite our best efforts, we still own…well…nothing. Statistics naturally vary, but it’s safe to say that an overwhelming portion of us, unlike our parents at this juncture in their lives, own no homes, no cars, no life insurance, no stocks or bonds, and have no substantial savings tucked away somewhere.
True—we’re a much freer generation; more mobile, less tethered. We gradually erode the conventions around and redefine what ‘work’ means, and are significantly more creative and independent in how we craft our professional careers. Alas, we live in a world where ownership still matters, and the lack of it bears serious consequences on our lives. Owning no homes means we’re highly vulnerable to the surging rent prices across the globe (and to the manias of our bizarre roommates and their pets). Having no property of any kind means we generally have no access to large sums of money if we find ourselves in an urgent need of it (for legal or medical expenses, for instance, or if we’re suddenly sacked or our slick Insta business fails). And for those of us living in the U.S., having no wealth to park somewhere also means being taxed way more heavily than those who own any sort of assets.
Yet, thanks to technology, our ability to become property owners in the foreseeable future may become more likely. At least for those with ‘basic’ purchasing power.
A new U.K.-based startup called Proportunity has recently been funded with millions of pounds by leading estate firms in order to develop and operate a machine-learning service that will forecast the rise of property value and assist new buyers in purchasing their first home. How will this work exactly? Proportunity will employ AI technology to help a future buyer find a house tailored to their need and within their price range at an area that they project will rise in value in the years following the purchase. Using their AI tool, Proportunity is able to narrow down its property value estimates to a two-block radius. Once the buyer procures the initial 4-5 percent of the required 20 percent for a downpayment, Proportunity will provide them with the remaining 15 percent and assist them in applying for an 80 percent loan-to-value mortgage through a third lender. The buyer would then have five years to return Proportunity the 15 percent based on the new value of the property (which is how the company will generate a profit).
Proportunity’s system solves several issues faced by young new buyers. Most notably, by providing the additional 15 percent needed for a downpayment, Proportunity eliminates the hurdle of saving up 20 percent of the property value (as the latter steadily rises, many first-time buyers find themselves unable to secure a downpayment). In an interview for Techcrunch, Proportunity CEO Vadim Toader states, “One of the biggest societal challenges we face is getting the next generation onto the housing ladder…The biggest reason this is hard is that it’s increasingly difficult to save up for a deposit, even for buyers with qualifying salaries. But what if we could use technology to give people a leg up onto the housing ladder? It all starts with forecasting”.
Toader further explains to Techcrunch that he and the company’s founders are motivated by the same needs as the rest of their generation’s members, and will themselves take out a Proportunity loan: “We’re going through the process ourselves, sitting in the customer’s shoes to better understand it and fix it before releasing it to them. [I] guess it also shows we’re eating our own dog food”.
Toader lost me at ‘dog food’, although the rest sounds fairly promising. If AI-based initiatives such as Proportunity were to gain steam and credibility and prove to be a successful tool in creating a new generation of home buyers, this could propel other lenders to accommodate their services to the needs of millennials and help pave a new path to Ownership.
