Real Estate operations have been around since the Ancient Greek and Roman Times. In early Greek times, land was not bought and sold, but instead allocated based off of merit. The state acted as the landlord for their entire polis, or city-state, using apartment style living.
Eventually, members of the ruling class began selling and leasing portions of their land to common citizens, marking the beginning of true real estate operations. However, these plots were sold for extremely high prices.
The Romans built on this, creating a system of dividing land into square plots called centuria (Wikipedia) to increase efficiency of land. They also continued the practice of overcharging for property (Moulton 1998).
By the early 1800's, there had not been much progress in rationalizing real estate as global societies were relatively segregated and markets were inconsistent. In the late 1800's, the Italians adopted a system of valuation based on location and assets for more consistency and predictability. The name of this system translates to the Cadastral System (Maggio 2018). This system arguable the first modern rationalization of the industry.
Next came mortgage payments, which exploded in popularity in the early 1900's with the increased use of credit. These allowed more people and families to buy houses, helping the industry grow. However, these loans had much higher interest and amortization rates for homebuyers to pay to banks (Hur 2018).
Following World War Two, the next development in real estate rationalization came along. After flocking to the inner cities during the Great Depression, mainly white families began moving out of the city to areas on the outskirts of cities. These areas were developed to house tons of families at low costs.
These suburbans consisted of many houses that are identical or nearly identical. Similar to a modern apartment building in terms of homogeneity, these neighborhoods sprung up all over the country in an effort to create efficiency in the housing market (Freeman 2020).
In the 1970's and 80's, commercial real estate began to take off. This branch of the industry sought to capitalize on the ability of land to produce efficient and calculable gains through urban development (Anastasia 2015).
Shopping malls were integral in the development of commercial real estate. Designed to consolidate tons of restaurants, stores, and more in a small, connected area, they increased efficiency massively in the world of real estate.
In more recent years, these indoor malls have been effectively replaced by outdoor malls. These further increase efficiency because consumers can now drive right up to the section or store they want instead of spending time walking through the massive indoor malls (Lender 2020).
The biggest modern development in rationalization is PropTech, or technology designed to assist in the process of buying, selling, and leasing property. There are three general waves of trends over the past 20 years or so.
First, the "Microsoft Era" gave tools like Excel to compile and bookkeep tons of data easily. It also allowed people and companies to create algorithms for calculable gains. Companies emerged to support this, but they did not yet share data, so they could not aggregate all of their information. This wave did not make the most drastic changes, but it was an important building block for the future.
The next wave of PropTech sought to put control back in the hands of the consumers by aggregating all kinds of data for public use online. Portals such as Trulia and Zillow emerged to provide consumers with an immersive online buying/selling/leasing experience by using the massive pool of data available. This increased the efficiency of the real estate industry massively.
Finally, the third wave took the ideas of the previous one and supersized them. AI combined with massive data pools allowed for companies like Airbnb to act as the seller, point of contact, agent, facilitator, and more for their transactions. This helps increase efficiency for the consumer while also allowing them to exhibit complete control over the industry (Xu 2017).
References:
Amadeo, Kimberly. “What Is Real Estate?” The Balance, 9 Apr. 2021, www.thebalance.com/real-estate-what-it-is-and-how-it-works-3305882.
Anastasia, Njo. “The Rational and Irrational Factors Underlying Property Buying Behavior.” Journal of Economics and Behavioral Studies, vol. 7, no. 2, Apr. 2015.
“Centuriation.” Wikipedia, Wikimedia Foundation, 15 Apr. 2021, en.wikipedia.org/wiki/Centuriation.
Freeman, Tyson. “THE 1950s: POST-WAR AMERICA HITCHES UP AND Heads for the 'Burbs.” National Real Estate Investor, Informa, 26 Feb. 2020, www.nreionline.com/mag/1950s-post-war-america-hitches-and-heads-burbs.
Hur, Johnson. “History of The 30 Year Mortgage – From Historic Rates To Present Time.” History of The 30 Year Mortgage - From Historic Rates To Present Time, 16 Dec. 2018, bebusinessed.com/history/history-of-mortgages/#:~:text=The%20idea%20of%20a%20mortgage%20started%20in%20England%20and%20moved,were%20different%20from%20mortgages%20today.
Lender. “Modernizing Old-School Real Estate Through The Technology Of Today.” New Silver, American Association of Private Lenders, 2 Mar. 2020, newsilver.com/the-lender/modernizing-old-school-real-estate/.
Maggio, Franco. “The Italian Cadastral System.” Agenzia Della Entrate, Dec. 2018.
Moulton, Carroll. Ancient Greece and Rome: an Encyclopedia for Students. Charles Scribner's Sons, 1998.
Xu, Louisa. “Modernizing Real Estate: The Property Tech Opportunity.” Forbes, Forbes Magazine, 21 July 2020, www.forbes.com/sites/valleyvoices/2019/02/22/the-proptech-opportunity/?sh=65c763555826.
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