Urbanbase, known for its technology to implement floor plans in three dimensions, is currently undergoing a corporate sale process. The company raised a total of 25 billion won in investment, including 13 billion won from Hanwha in 2021, and was evaluated to have a corporate value of 400 billion won. However, with the recent downturn in the South Korean real estate market over the past 1-2 years, its revenue did not increase, only losses accumulated, leading to the eventual decision to suspend its business.
Just a few years ago, Korean proptech companies, which were the focus of the investment industry, fell into a serious crisis due to the direct hit of the real estate market downturn. Korean proptech companies saw rapid growth during the Moon Jae-in administration when housing prices were rising and real estate transactions were active. Most companies adopted business models such as mediating the sale and purchase of houses and buildings, providing price and transaction data, and interior design estimates and construction.
However, since 2022, they have faced difficulties in securing liquidity due to high interest rates and high inflation, followed by declines in real estate prices and transactions, leading to a sharp decrease in demand and investment in these companies.
Zigbang, the leading player in the domestic proptech industry, recorded a consolidated operating loss of 40.8 billion won in 2023, an increase of about 10% from 37 billion won in 2022. Compared to 820 million won in 2021, it increased to five times its level in just two years. Zigbang Partners, a subsidiary that mediates transactions in partnership with certified real estate agents, implemented a voluntary resignation program at the end of last year, laying off about half of its employees.
RSQUARE, specializing in commercial and office real estate, reported a revenue of 146.2 billion won and an operating loss of 23.8 billion won in 2023. Revenue decreased by 20.5% in a year, while operating losses more than doubled. Meanwhile, r114.com, focusing on real estate data analysis, saw its operating loss increase from 500 million won in 2002 to 3.3 billion won in 2023. Interior design startup Apartmentary also witnessed a 66% increase in operating losses, from 3.5 billion won in 2022 to 5.8 billion won in 2023.
According to the Korea Proptech Forum, which currently has over 340 member companies, the investment attracted by member companies decreased from 2.6943 trillion won in 2021 to 1.2 trillion won in 2022. Investment attraction in 2023 amounted to only 291.2 billion won, shrinking to one-ninth of the level in just two years.
Experts point out that the revenue structure of proptech primarily relies on advertising fees from certified real estate agents based on real estate transactions. However, the business model suitable for the real estate boom has reached its limits, revealing vulnerabilities in risk management.
Cho In-hye, secretary general of the Korea Proptech Forum, said, “Proptech companies are inevitably affected by the real estate market, but most domestic companies lacked preparation for the downturn in the market.”
