Disruption and the matching market for new multifamily housing in Melbourne,Australia

Introduction

This article examines the impact of technological change on matching markets and in particular that for the development of new multifamily housing ¹ in Melbourne, Australia. Evans and Schmalensee (2016) argue that matching markets have been ‘turbo-charged’ by the combined impact of technologies including powerful computer chips; the Internet, the World Wide Web; broadband and mobile communications; and programming and operating systems. Such change can be viewed within a wider discourse on ‘disruptive technologies’, which have disrupted or redefined the performance trajectory of many industries leading firms resulting in their failure (Bower and Christensen, 1995; Christensen, 1997). In some accounts, digital disruption is part of the third industrial revolution, while the convergence of physical, biological and social worlds enabled by computing, 3D printing, artificial intelligence, the Internet of Things, robotics, nanotechnology and photonics forms the basis of the fourth industrial revolution (4IR) (Groscurt, 2018). Schwab’s (2017) influential definition of the 4IR, however, does not make this distinction. Rather, he argues it is how these technologies ‘build on and amplify each other’, drawing attention to the velocity of change; the breadth and depth of change; and systems impact (Schwab, 2017: 1–3). In Schwab’s view, digital platforms, such as Uber and Airbnb, are part of the megatrends that exemplify the 4IR. Both are examples of matching markets.

Like Christensen and Raynor (2003), however, our focus is not on the technology per se but on ‘disruptive innovation’. But we also shift the focus from firms and industries alone to the type of market allowing us to extrapolate the lessons from the so-called disruptors, Uber and Airbnb, to the development of new multifamily housing in Australia.

The existing matching market for new multifamily housing in Australia does not function well. Obtaining off-the-plan sales (or ‘presales’) is difficult and costly and presale contracts are subject to ‘settlement risk’, being the risk that in certain circumstances buyers have strong incentive to avoid final settlement of the contract. Settlement failure often occurs if the value of the apartment declines in the time between contracting and settlement of the contract (Bleby, 2016; Bryant, 2012; Derrick and Barker, 2012). It is a risk that is not adequately addressed by contract law (Sharam et al., 2015a).

The outcome of this poorly functioning matching market is an oligopolistic industry (Coiacetto, 2009; Dong et al., 2006; Ong et al., 2003), which builds, overwhelmingly, speculative product for rental investors (Birrell and Healy, 2013; City of Melbourne, 2013). This product is typically poorly designed, of low quality and of low sustainability (Buxton et al., 2016; City of Melbourne, 2013; Government of Victoria, 2015; Higgins and Moore, 2015; Moore and Doyon, 2018). Supply also lags well-behind demand. A consequence is that aspiring owner-occupiers on low to middle incomes willing to purchase new higher-density housing only have the option of product built primarily for rental purposes. Apartment prices may be relatively affordable compared to detached housing in the same locations, but quality and amenity is frequently poor. The result is that while nearly a third of Australian private renters live in higher-density housing, only 6% of the 69% of Australian households who own their home live in higher density housing (ABS, 2016).

This provides the context for a new profit-for-purpose housing model, Nightingale Housing Ltd. (NHL) which was established in 2015 to facilitate the development of quality, well-designed multifamily dwellings for owner-occupation, at cost to the buyers. As a recently established entity, there is limited scholarly research but extensive media (Moore and Doyon, 2018). The author, however, interviewed four key actors involved with the model. NHL is of interest because in targeting aspiring owner-occupiers and providing award-winning design and sustainability at a significant discount to market it found a recipe for addressing the matching problems that plague the speculative industry. Not only does NHL expend almost nothing on finding buyers, the settlement risk is also close to zero. Our contention here is that the NHL model could pave the way for disruption of the multifamily development industry because it addresses, albeit inadvertently, the problems typically encountered in matching markets that result in their poor functioning. But without the Internet and social media, this would not be possible.

The article proceeds as follows. In the following section, we introduce matching markets and locate them in relation to technological disruption and the 4IR. In the third section, we outline the traditional multifamily development model and the problems that the model creates. We turn in the fourth section to NHL, describing what it does, and how this innovation might translate into disruption. Problems with NHL model are discussed in the fifth section, and a possible solution is canvassed. Conclusions are made in the last section.

Matching markets

Matching markets are markets in which agents seek to be paired with someone or something with the criteria for matching often highly specific and requiring reciprocity (Abdulkadiroglu and Sönmez, 2013; Agarwal, 2017). Within the economic field of matching markets, housing is considered to be a matching market rather than a commodity market (Roth, 2015). In commodity markets, the homogenous nature of the goods means price is the mechanism that connects buyers and sellers. Housing, unlike commodities, is highly heterogenous and price is only one factor among many that determines a match. The housing system is moreover not a single market, but rather is comprised of many matching markets

The need to pair means in many matching markets, including housing, finding a match can be very difficult and/or prohibitively expensive, with high search and transaction costs. Prior to the Internet, the cost and difficulty of securing matches means many matching markets traditionally have not functioned well. Commodity markets evolved in response to such difficulties in finding matches (Roth, 2015). The key method of overcoming the challenges in securing matches in matching markets has been the use of matchmakers or intermediaries to facilitate matches.

The concept of matching markets emerged in the early 1960s with Gale and Shapley’s (1962) work on the matching of marriage partners which resulted in their deferred acceptance algorithm proposition. Surveys of the field have been provided by Abdulkadiroglu and Sönmez (2013), Roth and Sotomayor (1990) and Soünmez and Uünver (2011). Soünmez and Uünver (2011: 781) locate matching markets in Matching theory:

Matching theory is a name referring to several loosely related research areas concerning matching, allocation, and exchange of indivisible resources, such as jobs, school seats, houses, etc. lies at the intersection of game theory, social choice theory, and mechanism design. Matching can involve the allocation or exchange of indivisible objects, such as dormitory rooms, transplant organs, courses, summer houses, etc. Or matching can involve two-sided matching, in markets with two sides, such as firms and workers, students and schools, or men and women, that need to be matched with each other. Auctions can be seen as special cases of matching models, in which there is a single seller. Recently, matching theory and its application to market design have emerged as one of the success stories of economic theory and applied mechanism design. (italics in original)

In Christensen’s (1997) thesis of the disruptive impact of technological innovation, new entrants in a market focus on less demanding customer segments as a strategy for gaining a foothold in the market or they create a market where none previously existed. In this understanding, Airbnb is a disruptor, but Uber is not (Christensen et al., 2015). The contention, however, that Airbnb created a new market (letting of spare rooms or beds) is questionable. But seen from the perspective of matching markets, Airbnb replaced numerous brokerage (i.e. matching) services that preexisted it. So, incumbent matchmakers were replaced by a new entrant matchmaker who could provide more frequent matches that were better, faster and cheaper. Uber, as a new matchmaker for rides, replaced a cosy oligopoly of matchmakers (the taxi companies) whose businesses were dependent on government regulation. Government restrictions on the number of taxi licenses and regulation of fares ensured operators would have the revenue to support a fleet capable of supplying peak demand, without the oversupply of vehicles in off-peak times resulting in price cutting. This meant most users paid for a service they were not using. Uber’s solution was to utilize an existing car fleet that had excess capacity during peak periods. For traditional taxi services, regulation served a purpose but the outcome was suboptimal. Uber is very relevant here because the existing multifamily development industry is an oligopoly (Coiacetto, 2009; Dong et al., 2006; Ong et al., 2003).

D’arcy and Keogh (2002: 19) argue that speculative developers essentially supply ‘a stream of entrepreneurial services’. The key role of the developer-as-middleman is to obtain the finance to undertake the development, organize the actors who do the building and find the buyers. The developer, importantly, assumes the risk for matches that may not be stable (the settlement risk). The developer, however, occupies the position in the supply chain that permits them to capture most of the uplift in property value that occurs when multifamily housing is developed.

Value creation is identified by Parker et al. (2016) as a central element in the success of the new matching market platforms. They argue that these businesses are

based on enabling value-creating interactions between external producers and consumers. The platform provides an open, participative infrastructure for these interactions and sets governance conditions for them. The platform’s overarching purpose: to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants. (Parker et al., 2016: 5)

Matchmaking intermediaries have not been a feature of the multifamily development market. Instead, speculative developers expend in the order of 10% of project funds on campaigns to find buyers for each and every project (Sharam et al., 2015a). These campaigns include extensive advertising, construction of display suites, engagement of sales consultants and, in some case, international trade fairs or offices. Financial advisors promote developments to their client lists. Some specialist property advisors, such as Apartment Development Register (https://apartmentregister.com.au/), have emerged to link buyers with property developments, describing the service as a dating agency that permits buyers to obtain quality product (Sharam and Bryant, 2017). An actual matching platform, Citiniche, was launched in 2013. Its founder, architect Ivan Rijavec, argued the model would lower prices and substantially de-risk the developer, while allowing the buyers to obtain ‘good design’ (Rijavec, cited in Edgar, 2013). These examples indicate that the idea of a marketplace to match owner-occupier presales and development opportunities is not entirely novel. By 2018, however, Citiniche had filed for voluntary deregistration as a company. No public explanation for the failure of Citiniche has been provided but this was a period in which the property market boomed, with much debate as to whether there was a property bubble (Shi et al., 2016). These conditions meant matching was unusually easy. Conditions have since changed and prices have faltered. Projects still in the presale campaign stage or post-presale stage have seen developers offering non-price financial inducements to purchase (see e.g. Bleby, 2018; Hughes, 2018; Schlesinger, 2017).

Returning to Christensen’s (1997) thesis that one type of disruption is where a new market is created, the establishment of a matching market for multi-residential development would be an example of disruptive innovation. From the perspective of Parker et al. (2016), this disruption occurs because the matching market permits the actors to interlope in new ways enabling ‘value creation’. Theoretically, a matching market for multifamily housing development could see the end of the speculative developer. This would have positive implications for the quality and affordability of new multifamily housing. Shifting the construction of new multifamily from a speculative market to effectively a contract market would permit the orderly matching of supply and demand, and moderate the boom and bust property cycle, which is a feature of Australian housing market.

Nightingale Housing Ltd

Nightingale Housing Ltd. is profit-for-purpose organization. Architects apply for a license to use the Nightingale model. Thus, each development is undertaken by a unique company established specifically for the purpose of building a single multi-residential project, with the applicant architect being a company director. In exchange for a license fee, the architect is provided with intellectual property such as legal template agreements, access to financiers and access to buyers on the NHL registration list. The architect-as-developer is required to adhere to high design, quality and environmental standards and deliver the apartments at cost to the buyers.

To date, one building known as Nightingale 1 at 6 Florence Street, Brunswick, has been completed (architect/developer being Jeremy McLeod of Breathe Architecture). Nightingale 2 in Station Street, Fairfield is under construction (architect/developer being James Legge). Nightingale 3 in Sydney Road, Brunswick, has planning approval (architect/developer being Andrew Maynard). A ‘village’ in Duckett Street, Brunswick, gained planning approval in December 2018. The village is comprised of seven different projects. Four are NHL model projects, one is a co-housing project and two are baugruppen-style projects in which the buyers are the developers. Other projects underway are Nightingale Freemantle (EHDO Architecture), and a hybrid development with speculative developer Lucent Capital with Breathe Architecture in Nicholson Street, North Fitzroy. Other architects have been licensed around Australia but projects are yet to commence.

NHL was established following the experience of the founder, Jeremy McLeod, in developing a precursor multifamily project at 9 Florence Street, Brunswick, The Commons.

The Commons won numerous sustainability and architectural awards, and the publicity generated a list of aspiring purchasers. This initial list has grown to around 5000 people (Lane, 2018). This aggregation of demand resolved the problem of finding presales ordinarily faced by speculative property developers, by providing a pool from which NHL proponents could draw. The Internet’s ability to promote discoverability has been critical to this. Media, largely online specialist news and magazine-type outlets, freely promote the model negating the need for presale campaigns. Buyers find NHL via its online presence rather than NHL proponents needing to search for buyers for each of their projects. Could NHL have attracted a pool of potential buyers in the same time frame, for free, 25 years ago? It could not have. The Internet increases the velocity of change as Schwab (2017) argues with the impacts being greater than simply shortening the period over which something occurs.

NHL, as a technology-enhanced matching market platform, utilizes its website, Twitter and email as its key communication tools, which reduces the transactions costs. Use of technology in this way is commonplace and denotes the most ordinary of approaches. This serves to underline the power of the Internet and social media. NHL, however, being little more than a pilot project has not moved beyond rudimentary use of its customer relations management (CRM) software system. The matching, once a buyer registers, involves the buyer opting-in at various stages of a development. This leaves the scope, if the market were larger, for a far more sophisticated approach, one that can potentially see the CRM interface with an online-membership portal and the use of algorithms or artificial intelligence to propose matches.

Delivery of housing at cost that embodies design excellence, quality and sustainability very clearly creates value for the buyers. These attributes mitigate the risk of buyers failing to proceed to settlement, or in the language of matching markets, provide the opportunity for buyers to pair with the product they want with little risk that the match will later unravel. The matches are stable. This stability has facilitated more advantageous financing arrangements, the financial benefits of which NHL pass through to the buyers, further reinforcing the stickiness of matches (Sharam et al., 2018b).

Purchase of the apartments, however, is contingent on development financing in the first instance and mortgage finance, the second. The development financing is comprised of two parts: senior debt, which takes security over the project assets, and equity investors who have no resource to security. The debt financiers required (for the first project) a 30% equity contribution. As each architect-as-developer is unable to bring equity to the project, NHL seeks external equity investment. These investors are offered a submarket return. This indicates that financial return is only part of the reason they invest. Some other type of value is being realized for them. Sharam et al. (2018b) found the desire for better designed housing and a more sustainable city were key factors, with some also concerned about declining housing affordability. The debt funders were a group of social impact investors and a pension fund who shared these concerns, with housing affordability, environmental sustainability and resilient communities, key objectives. While the debt lenders sought market returns, they changed some of their lending parameters to facilitate the deals (Sharam et al., 2018b). Buyers are able to seek mortgages from any provider, but NHL has developed a special relationship with the cooperative and mutual banking sector, who are keen to respond to members’ concerns with regard to housing affordability and sustainability. The individual architects are able to obtain work that enables them to deliver design excellence (and conversely avoid undertaking work for profit-driven developers that they regard as soul destroying), and contribute to a better city. Notably, the debt financiers take the unusual step of not requiring a personal guarantee from the architect-as-developer, which frees the architect to facilitate the creation of value for each of these participants.

The debt financiers, in particular, are interested in how the model can build sustainable communities. A key design element is the inclusion of common laundries and communal spaces to encourage interaction. Another is bringing buyers into the process at a very early stage. NHL surveys those on the list regarding their preferences, interviews buyers and holds feedback sessions on the design progress and costs. Each project builds a community well before the project is completed. This is also a process that increases the stickiness of the buyers.

Finally, the debt financiers were convinced the model strengthened matching and that the registration list would mitigate settlement risk (Sharam et al., 2018b). This theoretical proposition was tested with the first project (Nightingale 1) when, as a result of a marriage breakdown, a buyer, 3 weeks prior to settlement, wanted to back out. A call went out to the list and elicited 11 households who were willing to immediately put down a deposit and settle shortly after (McLeod, 2018b). Risk mitigation of this type delivers another form of value to these social impact investors, who can be confident that their funds will be returned to be made available to future borrowers. This is particularly important in Australia as impact investing is a nascent sector with limited capital (Muir et al., 2018).

In recognition that the waiting list mitigates settlement risk, Social Enterprise Finance Australia (NHL’s first development financier, who have subsequently coordinated debt funding for subsequent projects) agreed in-principle that this would enable them to provide a higher proportion of the capital required, reducing the need for equity investors, and hence reduce the overall financing costs. On this basis, NHL launched UrBau, a baugruppen-style syndicate model, in which the syndicate members provide 10% of the capital funds with the debt financiers providing upwards of 90%, well above current norms.

While the NHL model is enabled by technology, it makes only the most mundane use of it. NHL’s strength as a platform is value creation, and it is this that holds the potential for disruption.

Discussion

In this article, we foreshadow changes to the multifamily property development sector, made possible by technologies associated with the 4IR. We focus on a start-up, NHL, which while not a ‘tech start-up’ (as many new matchmaking platforms are frequently described) relies on disruptive technologies. Like all start-ups, its impacts can only be forecast. In the preceding sections, we have argued that NHL promises to have a systems impact and, accordingly, can be considered a part of the 4IR as defined by Schwab (2017). It is creating a market, where one did not previously exist (considered to be disruption as defined by Christensen et al., 2015) through identifying how the existing market could evolve from being high risk/high reward to low risk/low rewards through the more orderly matching of supply and demand. This, in turn, could facilitate a shift to high-quality, sustainable and affordable housing, a desirable change given the twin challenges of declining housing affordability and climate change.

An important caveat is acknowledgement that property development is a lengthy process, with the lag between purchase decision and delivery of the product setting development apart from other markets. This time delay, as noted, is implicated in matches unravelling. Here, we examine why NHL may not result in system change and how the model could change in order to improve the likelihood of surviving and facilitating the shift to better owner-occupied multifamily housing.

NHL faces the difficult problem of scaling up in order to satisfy demand for their product, but this should not be seen as simply a supply-side issue, although supply is a critical problem. In traditional economics, excessive demand is a problem firms love to have as it provides the opportunity to raise prices. In matching markets, it denotes the inability to make matches and in NHL’s case it means the registrants list and the de-risking benefits this has for the model are likely to be undermined by registrants giving up on them. In short, unless a reasonable number of registrants can be satisfied, registration only provides an illusion of demand. One part of the solution is to encourage competitors. Another is to fully understand the preferences of the demand side. We will now expand on both of these points.

The NHL model involves licensing architects-as-developers to undertake developments. In theory, many developments could be initiated. However, to date, only a modest number of architects have been licensed and many are yet to launch projects, with the cost of land in desirable localities a barrier to delivering on affordability aims. The choice of localities is subject to three factors. Firstly, town planning regulation nominates the areas for intensification, which are regarded as suitable for multifamily development. This has the effect of inflating land values, undermining affordability objectives. Secondly, financing is critical, with the loan to value ratio (reflecting the relationship between build cost and market value) restricting projects to high, but not too high, land value localities. Thirdly, there are the preferences of the aspiring owner-occupiers. NHL are concerned that registrants are nominating their preference localities based on where they believe there is a greater likelihood of projects occurring rather than where they would like to live (McLeod, 2018a). In effect, registrants are engaging in strategic gaming. It is this factor that matching markets theory can provide insight into.

Strategic behaviour is a central concern of designers of matching markets. The designer will seek to ensure participants can do no better other than state their actual preferences (Soünmez and Uünver, 2011). For this to occur, participants must be able to trust that their disclosure will bring them the best outcome possible. NHL currently has around 5000 registrants (Lane, 2018), the majority of whom have stated a preference for the suburb of Brunswick, which happens to be where the first project was built, where the second is underway and where land for seven new development have been announced. The only other project underway is in Fairfield, 6 km away. The majority, therefore, are competing for around 200 proposed dwellings. In theory, however, a small development of 20 apartments but with only one hundred interested buyers in a neighbouring suburb a little more distant from the city centre, where land is cheaper, would have better odds of obtaining an apartment. The resolution for NHL is in fact quite simple. HNL needs to communicate to potential and actual registrants that localities are driven by their preferences, and the impact underlying land values has on project viability and what it means for affordability. To date, they have not done this.

The NHL model as it stands runs the risk that its registrants list could prove illusionary. In the first instance, supply-side constraints mean too few opportunities to purchase are created. The registrants can opt in to ballots for apartments as these opportunities occur, but ballots as an allocation mechanism means obtaining an apartment is a matter of chance. The combination of too little development and balloting (instead of a waiting list for example) is likely to result in disengagement and households choosing other housing options. It is not very likely that they will remove themselves from the list so the list will not reflect demand. Matching market theory can also offer a solution to this problem: switching from the current one-sided matching market (one-sided as the buyers have preferences but NHL does not, beyond initial entry criteria) to a multisided matching market. Multisided facilitate interactions between more than two types of customers (Evans and Schmalensee, 2016; Evans and Unsworth, 2012). A multisided platform would provide competitors access to the registrants list, providing a ‘thicker’ supply-side.

Multisided platforms exhibit strong network effects. Evans and Schmalensee (2016: 11) argue that these matchmakers are businesses that ‘operate under a different set of economic rules’ as the objective is to sell access to members in the group(s) on the other side(s) of the market. ‘Demand by each group of customers’, therefore, ‘depends on the demand of the other group served’.

NHL has competitors such as Assemble Communities (www.assemble.com.au) and Melbourne Affordable Apartments (MAP) (see Raynor et al., 2018), which also aim to provide affordable home ownership (via a rent first model in the case of Assemble, and for providing exits into home ownership for social housing tenants who pay market rent in MAP’s case). The overlap between NHL and Assemble is strong, and some of the social tenants targeting by MAP could equally choose NHL or Assemble. Instead of each searching for buyers, recruitment could be conducted by a shared platform. An independent platform could recruit other developers, which would increase the opportunity for matches by making the market ‘thicker’ on the supply-side. These participants could be speculative developers, but their projects could be rated (on indicators such as energy efficiency, renewable energy, common spaces, design, affordability, density, height, tenure mix, etc.). A requirement for accessing the buyers would be a requirement to share the savings made through using the platform with purchasers, so that value is created, as Parker et al. (2016) suggest. Platform participation, moreover, would require the proponents of speculative projects to brand themselves more strongly and respond to not just aspiring buyers but to tenants. A platform that registers aspiring buyers is likely to have tenants as members until such time as they buy. Providing the opportunity for tenants to rate the apartments they live in and have those ratings linked to the developer provides market information that is otherwise missing. With tenants rating the previous work of developers, investors, too, would have a stronger understanding about demand for any product they purchase.

There are other non-profit supply-side actors that could use the platform. This includes community housing organizations that provide affordable home ownership opportunities, key worker and other affordable rental options, in addition to social housing. Eligibility rules make matching more difficult so aggregation of housing consumers would assist the search process. Advertising through the platform need not be broad-brush but could target discreet tenure types or cohorts defined in other ways. If the platform had a very broad membership of rental households in addition to households looking to purchase an apartment, it would permit a provider of subsidized key worker, or a market-based build-to rent company the opportunity, for example, to gauge demand in specific locations, prior to making any major commitment. There would be two routes available. The platform would have valuable data that could be used for research purposes. Secondly, the provider could call for expressions of interest.

The Housing Hub is a Melbourne-based nascent matching market established to support the development of specialist disability accommodation market. The Housing Hub also accepts rental vacancy and sales advertising for properties that are accessible, thus making these dwellings more discoverable. Finding existing accessible housing is particularly difficult as modifications are regarded as detracting from the value of the property (Imrie, 2005). NHL, Assemble and MAP could join an expanded Housing Hub. There is already some overlap as NHL is a supplier of silver-level accessible housing and will provide gold- or platinum-level accessibility if a buyer seeks it. The owners of the Housing Hub are open to their platform taking a broader matching role (Sharam et al., 2018a).

The other key group that could use the platform are deliberative developers. Individuals could use the platform to find others with similar aspirations, or by a development services company as outlined in the third section. NHL has moved in this direction with its UrBau model, recruiting syndicate members from the list. Syndicate members can expect a discount to market of 30% (McGregor, 2018). The additional savings and the requirement to contribute equity (rather than pay a deposit) increase the stickiness of the match. While not risk-free for the members, it has a very significant key advantage: it guarantees the household will obtain a dwelling. The likelihood of the match unravelling is very low.

Conclusion

A single platform capable of matching tenants, buyers and deliberative developers to various housing opportunities would increase the pool from which matches could be found to the advantage of all its users. The developers still compete but, in effect, cooperate in order to grow the market and add value for participants. This may appear to be paradoxical but points to the how matching markets are different from commodity markets. A single platform would also be cheaper than each developer operating their own platform and resolves some of the difficulties highly specialized platforms have in driving traffic to their sites. Should such a platform grow, however, it may face the possibility that rival platforms will emerge, or more likely, that an existing large-scale real estate platform will turn their attention to this market. Such a platform would provide for economies of scale. As Eisenmann et al. (2006) outline, platform owners need to consider whether there is room for more than a single platform, with a key question being the value to users in there being competing platforms. A case in point is the sale of accessible housing short-stay platform, Accomable to Airbnb (Gazda, 2017).

Schwab’s (2017) influential definition of the 4IR concerns how technologies ‘build on and amplify each other’ and draws attention to the velocity of change, the breadth and depth of change and systems impact (Schwab, 2017: 1–3). He includes the emergence of companies such as Airbnb and Uber within this definition. These companies represent what Parker et al. (2016) describe as a ‘platform revolution’. This revolution, Evans and Schmalensee (2016) argue, involves the ‘new economics’ of matching markets that have been turbo-charged by technology. The examples of Airbnb and Uber set a very high bar for disruption.

In this article, we have argued how technology has created the opportunity for improving the matching of presale buyers to new multifamily housing. In doing so, we have applied theoretical understandings of matching markets to observable changes in the new multifamily development market in Melbourne, Australia. The concept of a matching market platform for connecting buyers of apartments with providers is not new with platforms established in Melbourne and Berlin, although both were short-lived. As Evans and Schmalensee (2016) argue, matching markets are a very different type of market and platforms need to be cognizant of this if they are to be successful.

We forecast possible transformations taking into account of the particularities of multi-residential development. The current innovation occurring can be described as a trickle; it might come to very little. However, it might become a torrent. The support of NHL by institutional investors such as pension funds (an AUD$300m NHL investment fund was announced in early 2018; Perinotto, 2018) is indicative that improved matching, associated risk mitigation and the value this can create could be the catalyst for system change. The pre-4IR residential development model is shaped by the demands of financiers, who are deeply concerned with the return of their funds, and who impose measures on borrowers to reduce risk of default. Mechanisms that could reduce settlement risk and increase the propensity for funds to be returned are, therefore, likely to be embraced by financiers. This suggests change will ultimately be driven by the banks, which would benefit from the establishment of matching market platform.