Kylie Davis: (00:00)

Welcome to the Proptech Podcast. It's Kylie Davis here, and I'm delighted to be your host as we explore the brave new world where technology and real estate collide. I passionately believe we need to create and grow a sense of community between the innovators and the real estate agents and property owners, and sharing our stories is a really great way to do that. The aim of each episode is to introduce this news to a Proptech innovator who is pushing the boundaries of what's possible and to explore the issues and challenges raised by the tech and how they can create amazing property experiences.

Kylie Davis: (00:35)

My guests in this episode are Chris Spanos and Mike Thanos from IDS, a company that specialises in conducting high calibre, automated property valuations at scale for government agencies with technology that is likely to impact how our cities are planned. Now, Chris and I used to work together at CoreLogic. In fact, we sat next to each other for over a year as co-workers on the solutions team. So we'd love a chat, but we kept it together in this episode with minimal in-jokes. Chris is a General Counsel and Executive Director at IDS and is a finance and valuation industry specialist with a double-degree in law, economics, and econometrics.

Kylie Davis: (01:18)

While Mike is a founder and director at IDS with an extensive career as an entrepreneur in the lending industry. And this includes involvement with LIXI, which promotes data standards for lending an LTI, a mortgage documentation e-signing, and workflow business. With residential property ownership being one of the most valuable assets in the Australian economy, it's absolutely critical for governments at all levels to have accurate insights into property valuation. Chris Spanos and Mike Thanos, welcome to the Proptech podcast.

Chris Spanos: (01:51)

Kylie, thank you.

Kylie Davis: (01:52)

It's great to have you here. So look, I can't wait. You know me, I'm a bit of a data geek, and I can't wait to talk about data and property valuations with you. So before we kick-off, though, we always ask, what is the IDS elevator pitch? So who's answering that.

Chris Spanos: (02:09)

I'll take that as short and sweet-

Kylie Davis: (02:14)

Sweet and short, yes.

Chris Spanos: (02:14)

... which is, our focus is on the future of property valuations in Australia. We understand how they are currently used in the market, and we want to drive how there'll be used in the future.

Kylie Davis: (02:23)

Awesome. Okay. Now, what does IDS stand for? Because there's a lot of IDS businesses out there if you Google them. So I want to make sure people can find the right one.

Chris Spanos: (02:33)

It originally stood for Insight Data Solutions, but that's kind of not particularly specific to property. It's just a generic site. Everyone just knows us as IDS. And if you want to find us online, it's just, IDS.IO is the easiest way to find us online.

Kylie Davis: (02:51)

Awesome. Okay. So what's the problem that we're solving, what's wrong with property valuations, and how they've always been done?

Chris Spanos: (03:00)

Historically there are a number of issues, but mainly time and accuracy across the board. So a physical bio would need access to a property, et cetera. So the problem we tried to solve is automated valuation models already sort of started tackling that problem. So we're looking at what we would call next-generation, market-leading AVMs. There's always a better way to build the widget. And also, at the same time, when you look at statutory valuations, what the government is trying to do is the land tax purposes for council rights purposes is what's known as mass appraisals. So they're not obviously physically visiting every property in Australia just couldn't possibly do that.

Chris Spanos: (03:47)

So they have what are known as computer assisted mass appraisal platforms. So we've developed a suite of AVMs and market analytics, and we also have acquired what was the leading computer assisted mass appraisal platform, also known as CAMA, from Thomson Reuters. And that's been now two primary focuses. So they are the solutions we're working on how do we improve valuations for the corporate sector of finance industry, and how do we improve statutory valuations.

Kylie Davis: (04:19)

Okay. So there's a lot of misunderstanding though about evaluation, though. It's like, why do I need different sorts of valuations? Isn't my valuation, my valuation? What's wrong with the way that they're... I mean, apart from the physical side of its older valuations, what are some of the problems that have existed with them to date, and how are you fixing them?

Mike Thanos: (04:38)

So Kylie, in terms of the difference, the reasons that there's no one valuation fits all use cases. The best way to think about that is to think about the party, the organisation who's using that valuation. So probably the thing that most people would understand the best would be when they want to go to an auction or make an offer on a property, they are located there to make sure that they don't overpay, but they also want to make sure that they're going armed with enough financial firepower to win if they really want that property. So, in that case, they're very interested in the market value of the property before itself.

Mike Thanos: (05:16)

A bank, on the other hand, is very interested to understand that if that loan ever gets into trouble and they need to enforce their security against it, that they're going to have sufficient headroom, that they're going to be able to get the money they've lent plus any interest or fees they bought back by selling the property.

Mike Thanos: (05:34)

So that's more a risk management sort of view. And then for the government, for example, doing mass appraisals, they're not just valuing an individual property. They're valuing every property in the jurisdiction. And their driver is one much more or much less about getting exactly the right answer for every individual property, but more making sure that all of the valuations looked relevant to each other, sorry, relative to each other, a fair and equitable so that when you have a conversation with your neighbour over the fence about your latest rates notice, you're not both getting a shock about the relative values of your property. It's because the reality is you probably both have a pretty good idea of what your own property is worth.

Mike Thanos: (06:16)

So the use case very much drives the methodologies that are used, and also what it costs to do these valuations because some need to be very, very fast and almost real-time, but others it's okay to wait longer and to spend more time on them because of the problem or the risk of getting them wrong is the loss that somebody would incur or the costs they would incur is very much, very much higher.

Kylie Davis: (06:42)

So this whole use case, and I guess it's also risk profile, too, isn't it? So you could get a different... if you ask St. George Bank for valuation of your property from St. George, and then you also ask NAB or ANZ that's very probable they would come back with something different based on their risk profile. Is that correct?

Mike Thanos: (07:01)

To some degree, I think that when you think about the sorts of products and information that we and others like us serve yet, you're right. In addition to the value itself, which we wouldn't give a different value for a different lender, but they may be more interested in different information about the property. That means that they're kind of black and white. Will we lend against this property type or a property with these risks full stop. That's typically where the differences come.

Kylie Davis: (07:30)

But when a property buyer or seller is sort of going onto an online website and looking for their property valuation, that's kind of the vibe. It's not necessarily the constitution, right?

Mike Thanos: (07:41)

Yeah. Well, I mean, the thing is that, and this is, I think one of the real challenges is that analytics and automated valuations have suffered from is that because in competing for the eyeballs of the customer, everybody has started giving them away. I think that's undermined their value in the eyes of the consumer. So yeah, I mean, people tend to think free stuff is not worth very much. What's interesting is that there's a lot of effort and a lot of data, and a lot of investment goes into producing those numbers. And they are models. So the fact that we've all got an anecdotal example of where one of those estimates was clearly wrong, even though it said that the confidence of the model was very, very low. I mean, that's completely expected from the point of view of the way those models work, and lenders use them like that. So if the confidence isn't sufficiently high... And there's a garbage truck backing up in the background. If the confidence isn't sufficiently high, the lender won't rely on them then they will get another form of valuation.

Kylie Davis: (08:48)

Right. Okay. So AVM came in with a low confidence. We're going to send someone out to go and do it properly and take in some of those vagaries.

Mike Thanos: (08:57)

Exactly. Or get a valuer to look at it from their desktop, which is that kind of mid-model that's in the market.

Kylie Davis: (09:02)

Okay.

Chris Spanos: (09:04)

Moving back to what you said before. That's not always the case either, right? If you have what Mike was talking about before, because of the risks and risk rules that every lender has, it may be if you have the right deposits or your LVR is low and they have a preexisting relationship with you, they will have a high tolerance for an IVM that has a large error rate, what we call FSD industry. And I'll say, "Okay, it's close enough within the ballpark that it's all a giant black box," as far as they have the mortgage applicant is concerned, but there is often a very complicated system of rules.

Kylie Davis: (09:48)

So random question with the rural property market, I mean, rural properties are often more problematic, aren't they? Or properties in country areas where the data there's not as much data as there is in most suburbs in the city. Is the rural property, boom making it a bit easier to get higher confidence around?

Mike Thanos: (10:10)

That's a good question. I mean, what we did see through COVID was that because volumes held up out in rural areas, even in Victoria and I think balanced also by the fact that there was just an increase in inactivity in those markets, as people fled to the CBD and brought forward the tree change or the sea change. It was interesting. Yeah. We saw what we saw and the way we measured. This is how confident does the model still thinks it is overall? And we really only saw the model claiming or recording itself to be less confident, typically in Metro areas. So you're right. That is what we observed for sure.

Kylie Davis: (10:54)

Yeah. Okay. So, how big is the issue of property, data, and valuations in Australia and globally? How big is this as a market? How much of it do we need?

Mike Thanos: (11:04)

I mean, it's a huge industry. So I mean, we all know that real estate is the biggest asset class in Australia. And so you would fully expect that they afford the products and services, and the money spent on understanding the value and the risks associated with that asset class are in the hundreds and hundreds of millions of dollars. And I mean, a good example too, as Chris mentioned, we now provide technology platforms information to government. So in Victoria alone last year, $2.5 trillion worth of property was valued on that platform.

Kylie Davis: (11:45)

Wow.

Mike Thanos: (11:45)

So every property in the state of Victoria and three values for each of those properties. So in effect, it was approaching 10 million estimates were produced on the platform. And the government spends tens of millions of dollars per annum on doing that. And the reason they do that is that it underpins at the moment, nearly $10 billion of state revenue, which is 20% of state revenue. So that's council rights and land tax in particular. And for example, if New South Wales is successful in the initiative that's been put forward to replace transaction stamp duty with a broader-based property tax, that 20% in New South Wales will become 40% of the state government revenue.

Mike Thanos: (12:31)

So, it's only growing in importance. And as the size of people's loans is growing overall and in an environment with very low-interest rates, again, for the banks to get the value of the properties they're lending against right, it means that spend and budgets and the volume of transactions, and the volume of data that's being ingested is increasing year on year.

Kylie Davis: (12:57)

Fantastic.

Chris Spanos: (13:00)

And if you look globally as an example, Zillow alone last year during the pandemic, its market cap has gone from 10 billion to 20 billion. If I check-in Black Knight and Call Logic US, and First American, you're talking about something like 35 to 40 billion in market cap. And that's with companies that are doing a relatively small amount of property data and analytics. I've got nothing like complete coverage of the US alone. So if we're talking about globally, what is property data and analytics worth? It's just if one company could do it all, it would be an Apple or a Google or an Amazon you're talking about. A very, very large total addressable market. And now let's hear a word from our sponsors.

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Kylie Davis: (14:58)

So how did IDS happen? Tell me the background of the company. Who came up with the idea, and how did you guys come together?

Mike Thanos: (15:08)

So my co-founder Louie Psaroulis and I founded the business in 2013. Louie and I had known each other for at least a decade before that because we both worked around, in particular, the mortgage finance industry, Louie, with his own business, which he sold to CoreLogic in the 2000s. And me with my own business, which wasn't in the valuation and property data space but in mortgage processing and technology and documentation.

Mike Thanos: (15:38)

So yeah, we said to each other, as we'd known each other and sort of becoming colleagues, that it'd be good to work together one day. So yeah, 2013 gave us both that opportunity. And so we founded IDS really based on the idea that firstly there was a reduced amount of choice in the market for those sorts of solutions. And we saw and heard from banks in particular and clients that there was an appetite for a challenger. And I guess also, when we think about the journey into the government space we'd seen for some time, it felt to us like the way that government did valuations in 2015 was very much the way that banks did them in 2000.

Kylie Davis: (16:27)

You think government was behind the hack?

Mike Thanos: (16:29)

They did. Yeah. So we could really see the way that would play out would probably be the same way it had played out with the emergence of the platforms like Murex, the emergence of AVMs, the broader use of data and analytics. So I guess what we are hoping we are doing is bringing our experience in doing that in the corporate space to the government space as governments need to do this more efficiently and more effectively. And the reality is there's an ageing population of municipal value was out there, who are all going to all be retiring in the next 10 years. And the industry it's not particularly sexy or interesting for young people coming into the industry. If it doesn't get into that space of data and analytics and modern technology. So we're hoping to be part of, I guess, that modernization process.

Kylie Davis: (17:23)

I guess too, if governments have a better idea of the valuation of every property, some of the stuff that we've seen over the last five to 10 years where infrastructure's gone into and valuations around, how much is it actually going to cost us to put in that freeway road, train station, underground tunnel, that's going to require X number of properties to come out for us to purchase. It gives you accuracy around predicting some of that costing as well. Doesn't it?

Mike Thanos: (17:55)

Well, it does. And it also gives government the ability to do value uplift capture to help to fund the investment that governments have to make in that sort of infrastructure. So, yeah, absolutely. And that's really all based on a good understanding of the properties, and the land uses that are around those corridors. For example, when a freeway or a rail line may be put through, but then yes, being able to model what would the impact in different scenarios be on making it-

Kylie Davis: (18:25)

The one else's property.

Mike Thanos: (18:26)

...easier for people to live there because there are services and they can suddenly... Yeah, it's a place people can realistically live and work.

Kylie Davis: (18:35)

Awesome.

Chris Spanos: (18:36)

And then if you look at the way they in online works as Mike referenced earlier, they're really doing three estimates per property. They're doing land valuation, improve valuation, and rental assessment valuation. So depending on your council rates or depending on your land tax, that may be levied on an unimproved value, but the improved value is still in the system as a whole bunch of data that's still in the systems. Governments, once they've got access to this data, there's all sorts of modelling they can do based on that.

Kylie Davis: (19:10)

Awesome. Okay. So how does IDS work, and what's your business model? I mean, you've obviously got a very lucrative contract with the Victorian State Government and what's the-

Mike Thanos: (19:22)

So we have fundamentally a SaaS business, and in the corporate space or, yeah, in the corporate space, our customers consume our services via our APIs. In the government space, we have a true platform. So we have 600 plus users logging onto the platform every day in Victoria and South Australia. But we also serve APIs, which integrate with other government departments, and we integrate to all of the council systems as well. So we really are embedded within the ecosystem that the government property ecosystem in the jurisdictions that we serve.

Mike Thanos: (20:00)

We haven't gone down the path of building a consumer portal, for example, because our view is that that market is very, very well served. What we do is that we power people who have their own consumers as customers, and we help them to deliver property-based experiences to their customers and into the workflows where they're servicing their own customers. So whether that's a bank or a mortgage broker, or a financial advisor, we sit quietly in the background, crunching the numbers and serving the information that helps people to create their own customer experiences.

Kylie Davis: (20:36)

Awesome. Okay. So what's the Australian... Now you touched on it a little bit before, and in the interest of full disclosure, Chris and I used to work together when we were at CoreLogic. So we were part of that when a lot of this valuation stuff was amalgamating into like a bigger company, but what's the property data universe like at the moment because you do have CoreLogic, which is the very big active on a new guy, referred to yourselves as a challenger. Why do we need more challenges?

Mike Thanos: (21:06)

Probably a couple of reasons. So I think while CoreLogic is the biggest obvious probably data analytics provider, for many Australian consumers, they actually think of realestate.com.au REI Group and domain being their two biggest data providers, because-

Kylie Davis: (21:24)

Yeah, I guess so.

Mike Thanos: (21:26)

...people just people sit on the weekend, just going through their listings. REA, we know, has acquired HomeTrack, and they're building their own CMA solution. So that we'll have something to bring to market as a competitive oddly professional. And obviously, domain has a price minder. So we are seeing a lot of activity in that space. And where we're seeing a lot of activity is there's a lot of startups, JLL has entered the IVM space. Realise which was acquired. Velocity is a competitor to CoreLogic's ValEx platform-

Kylie Davis: (22:00)

Are they competitive to you as well?

Mike Thanos: (22:05)

Not directly, because they're looking at workflow management to finance valuations, which is something we don't do at the moment; PointData has come out of South Australia. There's another group called Value Australia. There's lots of startups. And I think really what's driving that is, everyone can say that there's an insatiable demand. And the thing that drives all of this at the end of the day is you want to remove what's known as isometric information.

Mike Thanos: (22:38)

So a really good sledding to go off on a very brief tangent. What we saw with GameStop right in the US stock market last week where a stock went from $20 to $450 in a week. And that's because a group of people on Reddit started buying shares and pumping it up. And that's a classic example where a small group of market participants knows something about the market that no one else knows, and then everyone piles in.

Kylie Davis: (23:08)

A little bit like you and your Apple shares, right?

Mike Thanos: (23:11)

Yeah. A little bit, but then it's definitely in charge. But so some guys with property, right? The example I gave with auctions, you really want, when someone goes to an auction, you don't want asymmetric information. You want symmetric information. You want buyers and sellers to know everything they can about the property. So it's a competitive marketplace. So why you're saying it is lots and lots of entries. And what I would expect long term is they'll definitely be consolidation. Just can't have that many small startups. I think the fintech space is very interesting and very competitive, but you will also see some consolidation, and we're already seeing some of that. So Realise was a startup in a thicket.

Kylie Davis: (23:58)

Thinking about that. ANZ was doing that?

Mike Thanos: (24:00)

ANZ was later acquired. And I think you'll see more of that along the way.

Kylie Davis: (24:05)

Yeah. I mean, we see this, don't we? There'll be a fluster of amalgamations. And then while everyone kind of comes under one bigger umbrellas and then sort of a couple of years later, there's another flurry of startups pop up. Well, one minute, it's good to amalgamate the next minute it's good to be independent. So we talked a little bit about COVID before. The volume of sales going through the system always impacts it. And you mentioned before about rural properties, seeing a lot more rural data coming through, but how did that COVID period affect valuations, and what is it going to mean as we come out of it? Anything?

Mike Thanos: (24:52)

Yeah, for sure. I mean, I think everybody has been probably, well, not everybody, but many people have been surprised by the resilience of the market. And so, I think at the bottom, we all still need a roof over our heads and perhaps if anything living through COVID and depending on where you were, but certainly as a Victorian, it's made you only more value having a roof over your head and value that environment. So with super-low interest rates as well. And you combine that with the fact that there's still tremendous demand for property. So there are some challenged classes, though, and there's no doubt that units and apartments in the major capital cities are challenged, and we've seen developers go into receivership and get into problem as well.

Mike Thanos: (25:48)

So it's not a one size fits all situation. And I think there's still probably the economic fallout is yet to play out because government support hasn't been fully withdrawn in the form of job caper, et cetera. And there's no doubt. There are businesses and, therefore, employees and business owners who are going to... that are economically challenged by this, which translates into mortgage arrears and things like that. But I think, we're very fortunate that the government has spent big and provided support. And fundamentally, the property market is still pretty sound, but it's still a pretty good bet. So there'll be adjustment, and there'll be challenges, but everything we have seen in the way our indices and our models have performed has borne that story out.

Kylie Davis: (26:36)

Okay. So we're not going to get a cut a year into the future and go, "Oh" We need to be careful of data because that was that period when everyone was in lockdown. It's kind of sorting itself out.

Mike Thanos: (26:51)

It does. And I think, though, we had to be very careful in monitoring the way that the models were responding to the data and, in some key areas, the paucity of the data. And we actually had customers very interested in understanding and getting us to explain that to them. So to get a little bit technical, for example, and I talked earlier about, or Chris mentioned FSDs, I mean, we saw properties migrating into higher FSD bands, which effectively means that the confidence of the model for that property in that area is now lower.

Mike Thanos: (27:25)

So, as a result, when you look at an entire portfolio of properties or portfolio evaluations, on the whole, the models were less confident about the value of those properties, and that's appropriate because they're supposed to respond, and they're supposed to be transparent about their confidence because that's a key thing for people who are using those estimates to understand.

Mike Thanos: (27:49)

We are now seeing, though, that those properties are migrating back more towards the long-term norm, which is the band in which they would typically leave again, based on the attributes of the property, the homogeneity of that property stock, and the amount of market activity that goes on there. So I think it's a good test for a model when and how it responds to those periods of time. And certainly, we've monitored very closely and been quietly pleased about the way they've performed through that period of time.

Kylie Davis: (28:22)

Cool. So just to confirm, what does FSD stand for? Just for those who don't know that acronym.

Mike Thanos: (28:28)

So that stands for the forecasts standard deviation-

Kylie Davis: (28:31)

Thank you.

Mike Thanos: (28:31)

...which is effectively it's a statistical term, the estimate of the error of the model or that particular estimate.

Kylie Davis: (28:39)

Yes. So remember when we were at CoreLogic, we used to say, there's no such thing as... You often get told all the data's wrong, but there's not the data's wrong. There's no such thing as right or wrong data. There's data that you understand the suppositions that are sitting behind the model. And the better you understand that, and the more clear they are, the more accurate the data is likely to be.

Mike Thanos: (29:07)

Yeah. Absolutely. And I think, look, I mean, this is certainly one of the things we've learned through our journey is that explaining the way these models work to our customers and then helping them to explain the way the models work to their customers is really, really important. And you actually have to invest quite a bit of time in there.

Kylie Davis: (29:22)

Oh, you do.

Mike Thanos: (29:22)

And in the process, it forces you to be very, very clear about what you're doing and to understand, but this depending again, on the use case, there's a level of that you've got to pitch the level of complexity, I guess, in sophistication at the right level. Otherwise, people just switch off or maybe even worse. They don't quite understand correctly, and they use things the wrong way.

Chris Spanos: (29:45)

And then I think just to double up on that point, just to be explicitly clear, often we are talking to people within lenders. These is finance professionals in the banks. And you need to explain it them and really get them to grok exactly what it is they should be doing with your indices, with your analytics, with your AVMs, and what it is.

Chris Spanos: (30:09)

So if you already have that issue within what you would consider a sophisticated consumer of data and analytics, it's no surprise that when a consumer sees an AVM on a website, like the REI or the domain website, and they're like, "This is completely wrong. Your model is garbage." Well, you wouldn't expect them to understand better. It's so difficult to explain exactly what's going on. And I guess real estate agents and mortgage brokers, as the two sort of frontline workers that have interactions with consumers, play an important part of that education process.

Kylie Davis: (30:47)

Well, and AVM is very different to the market price.

Chris Spanos: (30:51)

Exactly.

Kylie Davis: (30:52)

And many agents would benefit from understanding that a little bit more clearly, as well.

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Kylie Davis: (32:05)

If it goes well, what stage are you at at the moment? How big are you, what's your size?

Mike Thanos: (32:12)

So we've got 20 full-time staff. We're based in Sydney and in Melbourne. We've got some pretty ambitious growth plans, which are tied to some large government opportunities that we're working on at the moment. And to support that because we're continuing to invest ahead of our effectively ahead of our revenue. We are at the moment about to launch a cap price that we're hoping to close up this quarter. So that will help us to increase the team significantly. Our biggest cost is people so getting excellent people on the team. One of the things that's different about the government space to our sort of banking finance space is that those are very large long-term contracts, and they involve very long and complicated transition periods because you're effectively putting a new operating platform into a valuer general's office.

Mike Thanos: (33:07)

A lot of system integration and configuration to suit and deliver on the jurisdictional requirements. That's the statutory methodologies and things. So that takes quite a strong project implementation delivery capability. So we're going to be investing quite a bit in that as well as continuing to invest in software engineers, data analysts, data engineers, and data scientists so that we stay ahead of the game and use the latest technologies and techniques when it comes to the analytic side of things.

Kylie Davis: (33:39)

Cool. Are you able to say how much you're hoping to raise?

Mike Thanos: (33:44)

It's millions of dollars. Yep. Millions of dollars for a kind of interesting but minority stake in the business.

Kylie Davis: (33:53)

All right. Okay. Well, we'll include some details in the show notes. If anyone is interested in that, they can reach out to you. So, how should real estate agents or developers be using what you guys do? Are they able to, or is it because you're SaaS based and B2B?

Chris Spanos: (34:12)

At the moment that the primary way they would do that is through some of our partners, like home loans, they uses our data as part of their own school. Or else I working with fintech like Australian mortgage marketplace for applying for a mortgage through IMM it'll layout or IVM that you'll be consuming. So because we've stayed out of the consumer market because it's so well serviced at the moment, it's primarily through touchpoints with our APIs.

Chris Spanos: (34:48)

So real estate agents directly and property developers, depending on how our rollout goes with our APIs, if you say a little IDS like us, a good example would be at the start of last year, St. George released an iPhone property app. So we're all over that, that ended up being a one-year pilot. And it was off the back of us being a graduate of Westpac's FUELD Accelerator, data accelerator programme. So we've built lots of relationships with Westpack, but a good example of that they tried an iPhone app, and they ran it in the marketplace for a year and then wrapped it up because I didn't get enough on-

Kylie Davis: (35:31)

Too many of us are on Android, Chris.

Chris Spanos: (35:36)

Well, I shouldn't speculate because maybe it didn't make some internal metrics I had. Who knows why, but we're always willing to... The way a real estate agent would consume us is not directly. It would be through someone else.

Kylie Davis: (35:52)

Okay. What do you think the next five years hold actually for the property valuation space? So, I mean, you've got a little bit of a crystal ball. If you know what's going to happen in government because you're seeing what's happening in sort of finance, but where do you see this going next? What are the big duck? What are the big trends that are going to affect it?

Chris Spanos: (36:11)

So in terms of the Australian landscape specifically, I think there's probably three trends we're seeing when it comes to property, data, and analytics that will directly impact the real estate industry and Australian consumers. First of these is there will definitely be consolidation amongst the data providers, and there'll definitely be consolidation within the valuation firms. You've seen that trend continuing.

Chris Spanos: (36:40)

The other thing that's interesting is looking at how every state and territory provides its data, which then affects how fintechs can use that data. So you can compare and contrast New South Wales, which has its open dataring issue, but all of their property sales and data that comes from the office of state revenue and the value of general's department is available for free versus other states and territories that have privatised their land registries. And what you've seen in most of those states and territories is a significant increase in the cost of procuring that wholesale data that might perversely end up having the consequences, consolidating, CoreLogic, REA, and domain as being the primary providers of this data, which I think it's something for the Australian government to be aware of whether what is best for the consumer longterm.

Chris Spanos: (37:39)

And then I think the last thing that will be interesting is how PEXA plays out because I think a lot of people understand the role PEXA plays in the mortgage workflow... Sorry, in the property settlement workflow, not mortgage workflow, but if you think about what's going on with PEXA, PEXA are often known as a real estate agent make somebody one of the things they do is they generate a CMA, but the other thing they're doing is they're opening up a workspace in PEXA as a potential transaction.

Chris Spanos: (38:14)

So PEXA will have access to very unique data, and what they do with that data, and how that plays out. They are the three trends we say. What I expect is the liberation of more data. And if you look at some of the things in the US, such as companies like HouseCanary and some of the stuff they're doing with imagery, you should say, and machine learning applied to data. You should see generational steps and data analytics and analytics and computer models, but it's very hard to predict how all of that will play out given those three things occurring in Australia.

Kylie Davis: (38:55)

So I just want to drill down on something that you said there. So on one hand, we've got automation and AI and image recognition and things like that, making it faster, quicker, cheaper, easier to pull data out of previously non-data environments. But then, on the other hand, we've got some government bodies basically charging an awful lot to access their aggregated data, which is pushing the price up and the access level down. Is that what you're saying?

Chris Spanos: (39:29)

Absolutely.

Kylie Davis: (39:29)

So the cost of data is very much in government, hands in most states in Australia.

Chris Spanos: (39:36)

The cost of the core data set.

Kylie Davis: (39:37)

Core data.Yeah.

Chris Spanos: (39:39)

So because of times toddling every single property sale gets registered at the state government level, and the state governments are the providers of that core sort of gold standard. This is the sale price, and this is the sale date of property, and everything else builds off that.

Kylie Davis: (40:04)

Awesome. So just like COVID, basically, the states really are in control. So one last question for you, what's the future of IDS once you've got... You've got your raise coming up. What comes after that domination?

Mike Thanos: (40:18)

So I think we'd be happy with Australian domination. Look, I think we'll keep doing what we're doing. There's a generation of ageing technology out there within governments that we are hoping to play our part in helping to modernise. I mean, we already have just under 30% market share in the mass appraisal space. And our short-term ambition is to take that to closer to 50%. And then, we want to be a core part of the ecosystem in the government valuation space, as well as we think that with our IVM technology and the data and analytics that we've developed for banks, that there's a long runway of opportunity there, I think probably the most interesting opportunity. And we'd love to see this play out somehow is to maybe unlock some of the data that's locked up inside banks and the data that's locked up inside governments around.

Mike Thanos: (41:18)

There's very rich property data sits in both places. And we think there are some opportunities there for either some exchange or some sharing to the benefit of the whole community. And we think we can play a role in being an enabler for that.

Kylie Davis: (41:33)

In a perfectly privacy-compliant way. Right?

Mike Thanos: (41:39)

Absolutely. And we see both sides of that equation. And yeah, there's no doubt that there are multiple dollars being spent by multiple organisations collecting and verifying and validating exactly the same information multiple times. So that seems to be pretty economically inefficient. And as you say, they're subject to making sure that proper governance and respect for privacy principles, et cetera, around that is protected. There are definitely opportunities to make this all work a lot more efficiently and a lot more accurately than it does today.

Kylie Davis: (42:16)

Fantastic. Well, Chris, if you've got anything else to add?

Chris Spanos: (42:23)

I think Mike summed that up nicely other than to say one of the dynamics we've seen in the past, and we saw that at CoreLogic where you have full large banks and each one of those protects that data as a mother protects their cubs. I really think that it is unique and it is a competitive advantage, but if you can find a way all four major banks and the eight state governments and territory governments to share their data, there is the sum of all those parts will be dramatically greater than the whole. And it will be to the benefit of all Australian consumers. I mean, if we are interested in a competitive, transparent property marketplace, which we should be, that's the only way to achieve the end game.

Kylie Davis: (43:16)

Yeah. And when we say sharing data, we're not talking about the necessarily the details of the individual people that are inside the properties. We're talking about that of the individual properties, then sort of building up to an aggravate gated dataset that the more datasets you've got, the broader and the richer and the deeper the information, which makes powers the models, right?

Chris Spanos: (43:40)

And the great thing about property data is the kind of thing that is with the right address matching, et cetera. It is the kind of thing that you can aggregate in a way that doesn't require any personal information. You can do all of this in a way that's completely compliant and doesn't even need personal information for matching purposes.

Kylie Davis: (44:01)

Yeah. Fantastic. Well, I look forward to seeing that, and best of luck, guys, with your next raise.

Mike Thanos: (44:10)

Thanks, Kylie.

Kylie Davis: (44:12)

Thanks so much for telling us about ADS. Thank you.

Mike Thanos: (44:13)

You're welcome. Thank you.

Chris Spanos: (44:13)

Thanks, Kylie.

Kylie Davis: (44:16)

So that was Chris and Mike from IDS, a Proptech specialising in large-scale property valuations for the government sector. The property valuation space has been fascinating over the past 10 years in Australia. It started with small specialist tech firms like IntelliVal, which was purchased by CoreLogic to become some part of something much larger, but over the past few years, other businesses have split off to see more growth in independent and specialist valuation firms like IDS and across both the residential and commercial space. So we're seeing much more specialisation in this space. And of course, Hometrack was purchased by realestate.com.au and is now PropTrack.

Kylie Davis: (44:57)

So everyone's interested in valuations, but there's no one correct way to do a property valuation. It depends on the purpose that it's being used for and the data parameters that are being included. So it's great to see this diversity and extraordinary expertise coming back into the market. The property market becomes more transparent and accountable with every new iteration of the modelling. So well done. Chris, Mike, and Louie, and the team at IDs, and good luck with your fundraiser. If you're interested in talking to the guys, I've included their details in the show notes.

Kylie Davis: (45:29)

Now, if you have enjoyed this episode of the Proptech podcast, we would love you to tell your friends or drop me a line either by email, on LinkedIn, or our Facebook page, which you can find on @KylieDavisProptech. You can follow the podcast on Spotify, Google podcasts, Apple, iTunes, and Anchor, and where all good podcasts are heard. And I'd really love it if you could subscribe or leave a review.

Kylie Davis: (45:54)

I'd like to thank my audio support, Charlie Hollins and Sam Hollands, and the fabulous Joe Escudero and our sponsors Direct Connect, making moving easy. Snitch, official brands of the Coptic community, and HomePrezzo are now part of active pipe and making marketing automation easier than ever before.

Kylie Davis: (46:12)

And if there were a Proptech, make sure you join the Proptech Association of Australia and join like-minded tech people who are passionate about property industry and committed to improving experiences in how we buy, sell rent, manage, build, and finance property. Go to propechassociation.com.au, and make sure that you also enter the Proptech Awards, which have just been launched. So thanks everyone until next week. Keep on Proptecking.