The term “big data” is quite simply a process whereby an enormous amount of data is analysed to predict changes, trends and movements in the market. This strategy is not new and has been around since the 1960s in the financial markets. There is speculation that it could make a massive difference to the worldwide property market and some companies are now more open to technology-based data analysis. So, will “big data” change the property market and the way investors and developers react?
Is this just data analysis by a different name?
On the surface “big data” could be seen as simply a data analysis process which takes in reams and reams of data. There is nothing new in using new technology and computing power to analyse data, recognise trends and give buy and sell signals. This is something which has been used in the financial markets for many years and to great effect for many people.
The property market is one area which has been reluctant to take on board this type of analytical approach which is more deep-seated than anything we have today. When you bear in mind that the worldwide property market is more integrated today than ever, in light of the Internet and other information exchanges, perhaps “big data” could make a difference?
Betting on a certainty
Using basic supply and demand data from across the country, and indeed across the world, together with other information this system could be extremely valuable going forward. Many people see analysis of the worldwide property market as “dark arts” which are practised by few and mastered by even fewer. However, when you sit back and think about it, is this type of analytical approach not just “big data” under a veil of secrecy?
The idea with this type of analytical approach is that complicated prediction programs take into account an array of different data, trends and market movements in the past. Like weather predictions, they can take all this into account and predict how the market should react in the short, medium and longer term. Whether the markets do react in this manner is a whole different discussion but it can take some of the risk out of investing – well in theory.
Good old gut feeling
One thing which may scupper the overall impact of “big data” is human nature and its unpredictable edge. Fear and greed dominate the markets, but how would you analyse fear and greed? Short-term speculators can pump markets up to levels which are unsustainable and which do not bear any resemblance to the underlying data. Like the stock market, as one example, there will always be a place for good old human gut feeling and experience. That is not to say that “big data” cannot have a major role in some areas but to depend on an analytic approach to everything could be dangerous. What would these systems have made of the 2008 US mortgage crisis which led to the worldwide economic depression?
Conclusion
While there is no doubt that more deep seated analytical strategies can unearth some interesting trends and predictions for the future, there will always be a place for good old fashioned gut feeling. So-called “big data” has made a major impact in other markets and there will be some property investors, developers and service providers who will use the data which the systems churn out. However, would you bet your bottom dollar on a purely analytical approach to any investment market let alone the property market?