A sense of rivalry across the 49th Parallel is nothing new – Canadians and Americans have been engaging in friendly competition in everything from sports to snacks even longer than the Yankees have been winning and the Leafs have been losing (while on the snack front, I still maintain that ketchup chips reign supreme as the ultimate savoury snack).
But the latest landscape where competition is heating up is in the already-hot PropTech market, where companies both north and south of the border are sprouting up in response to rapidly rising demand.
The Rise of PropTech
The digital transformation of the real estate industry known as PropTech (or more commonly known as ReTech in the US) has been a long time coming; it’s a revolution in response to the inertia that’s plagued the real estate market for the last few decades, a landscape in which paper ruled, data lagged, and developers were leaving precious dollars on the table, unable to capitalize on changes happening in real time.
Today, any platform that empowers a real estate business to operate more efficiently and effectively using technology is considered PropTech. But how does the industry differ between the US and Canada? Let’s look at five major factors in the industry and how they’re impacting Canadian and American PropTech.
Housing Supply & Immigration
The shortage of housing – particularly affordable housing – is a global problem, one that’s been accelerated by the pandemic. Research shows that, even pre-pandemic, the US was short 3.8 million homes; only slightly outpacing Canada, where an additional 3.5 million homes are required by 2030 in order to reach affordable levels. This marks a big opportunity for PropTech businesses looking to aid the shortage, from platforms that source alternative financing solutions, to fractional ownership services, and even tech companies that are focused on streamlining affordable rental options in cities across the continent.
But we can’t talk about housing supply without also touching on immigration. In the US, uncertainty around immigration policy leads to uncertainty around just how many people will be contributing to the economy and looking to rent in the future. Conversely, in Canada, favourable immigration policies and much higher rates of immigration are helping to increase participation in both the rental market and homeownership, creating more demand for PropTech companies looking to service these verticals.
Politics & Economics
When we turn to politics and economics, we see many similarities between the US and Canada. Both countries are expecting slow economic growth over the next several years coming out of the pandemic, and both countries are currently experiencing a change in direction from the “free money,” near-zero interest rates of the last decade as rising mortgage rates from the Federal Reserve and the Bank of Canada try to get inflation under control. But, where expectations for the US are hovering around a 4-5% drop in home prices for 2023 and 2024, the forecast for Canada predicts a double-digit fall – as much as 18.2% over the next 12 months. Whatever the actual outcomes, these changes will have an effect on the overall health of each housing market and, therefore, an effect on PropTech as well.
While politics and economics show parallel trends between north and south, funding is an area where Canada and the US differ in significant ways. In the US, due to a period of sustained uncertainty in government, and complicated foreign and domestic relations between 2017 and 2021, public funding for PropTech was at risk of being taken away, creating challenges in continuity and growth for real estate and technology businesses. In Canada, PropTech businesses have enjoyed more consistent cash flow thanks to a strong demand for tech solutions that help address housing issues, and generous funding, including $4 billion in national tax incentives, and 175+ incubators and accelerator programs encouraging entrepreneurship in this growing industry.
Concentration of PropTech Businesses
While we generally expect the difference between a US and Canadian marketplace to differ by a factor of 10, the sheer number of PropTech businesses in the two markets demonstrates the slightly more favourable conditions supporting PropTech north of the border. The US boasts approximately 2234 PropTech companies across many different verticals. In contrast, Canada boasts 450+, roughly double what we would expect simply by using the ten-factor.
Opportunities for Growth
The last element we’re set to compare is the opportunity for growth across both countries. According to Future Market Insights, the PropTech market in America is expected to grow at a rate of 16% through 2032, reaching a market share of $86.5 billion. Meanwhile, in Canada the 25 top-funded PropTech start-ups have raised nearly $1.5 billion in funding, and our thriving real estate industry, coupled with immigration policies that attract the best talent from around the world, put us at the centre of a perfect storm of talent, innovation, and immigration. At every level of government there are programs and incentives designed to hire and keep engineering teams in Canada and, on top of that, talent is still cheaper here than in the States.
The bottom line is that, whether you’re a Canadian company, or hard at work in the US, the future of PropTech looks bright as companies across North America try to address and improve challenges in the real estate market using future-forward technology solutions.
This article was produced in partnership with STOREYS Custom Studio.