Generation Rent is here, and whichever side of the fence you sit; be it renter or owner, there are pros and cons to be found. Following the cheap credit of the early 2000s too many people took out mortgages they could ultimately not afford, resulting in a free-fall in home ownership since the infamous crash of 2008. The housing market seems to have regained its momentum here in the UK with some warning the emergence of a bubble on the horizon as prices in London soar at around 17% increase per annum. Logan Hall comments on the new generation of renters and what they are looking for…
This has put the idea of home ownership even further beyond most people’s reach; access to loans has become harder as banks are more risk averse and certain banks are introducing loan caps. The loan to valuation now required for a home purchase is prohibitively high; people now need much more cash in their piggy banks for the deposit. All of this has increased the demand for rental properties around the UK, especially in London. It’s predicted that by 2020 around 40% of Londoners will be in the private rented sector. This really is the emergence of Generation Rent and the UK is looking more like the rental landscape seen in Europe, with a prevalence of long-term rentals. Generation Rent is no longer seen as a derogatory term and means anything but a second-class citizen. Many renters around the UK would proclaim they prefer the freedom afforded through renting. As the work force becomes more globally transient and travel has become more affordable, people are more likely than ever before to choose renting to fit with their lifestyles.
But the private rental sector is fundamentally different to that seen prior to the Thatcher years, when home ownership was once more put on the political spectrum. Today’s generation of renters is young and has grown up with technology, smart phones, apps, social media and a greater desire for transparency when dealing with businesses. The irony is that this technology adoption and cultural shift doesn’t seem to have moved into the rental market as of yet, and for this I have several theories.
Those in charge, the economic buyers, or landlords are generally older and therefore have less affinity with technology. They are less habitual users of mobile and social technology than their customers (tenants) and were happy with the status quo. Hence paper-agreements, the use of agents, using a multitude of independent systems to manage a rental portfolio are still the norm.
Secondly, agents have been slow to embrace the technological changes available in the rental market, because with greater transparency they worry they may remove themselves from the equation and lose the ability to charge fees for services rendered. The only progression in this space is that some agents have gone online, replacing bricks with clicks. But the business model is exactly the same; there are still ‘middlemen’ competing on costs. They have made the mistake of focusing solely on sustainable innovation, and have totally failed to spot the elephant in the room, the disruptive innovation of peer-to-peer technology.
Rachel Botsman, a global thought leader on the power of collaboration and sharing through digital technologies, has stated that the peer-to-peer rental market is worth $26 billion globally. As momentum for peer-to-peer business models in other industries has increased considerably, many global success stories have emerged offering increased value for both ‘sellers’ and ‘buyers’. There now seems to be pressure from the customer (or renter) for evolution in the private long-term residential rental market.
So in a world where your customers are online, social and connected don’t you think it’s high time you are too? As the number of renters increase and the choice of rental properties increase too, renters are looking more toward the overall experience of renting a property and not just the state of the property. They want to know that the property owner is going to look after them and the property. Therefore, it is my belief that renters will be asking to see a rental history of owners as much as owners are of renters. From my experience of dealing with landlords around the UK they are proud of what they do, and strive to offer a great service to their renters; they just perhaps lack the tools to be able to do this adequately. Of course, there are always rogues in every industry, but rather than wait for government intervention I believe the market will actually drive the change. This is apparent as many businesses are popping up in this space to solve various pain points for renters and owners alike.
As we’ve seen in the travel industry, I believe there is a mass migration coming up in the long-term rental market. We once used to walk into a travel agency, and then we went to online travel agents… now we use online peer-to-peer websites such as Airbnb to book rooms around the world when we go on holiday. Guests love the personal, local and honest approach to short-term rentals, and it’s apparent that this is moving into the longer-term rental market. We had traditional agents, then online letting agents, and now new rental platforms like Movebubble that offer direct access to the best renters and owners alongside all the digital tools required to ensure litigious management of rental portfolios on the move, from any device you might have in your pocket. Platforms like this enable property owners to access a professional global home mover market and pre-screen them, list and publish property across the Internet, schedule viewings, negotiate rent, sign rental agreements online, take rent and deposit payments. All for free. The exciting thing for owners around the UK is that they no longer need to pay for the services offered by agents but instead they can take control of their investment and maximize rental yields all from a single easy to use dashboard. They can be Unagents.
Don’t ask yourselves whether you want to engage with Generation Rent, ask yourselves when you need to make the jump. It is inevitable that in order to find the best people to live in your rental property you will have to meet them on their territory, in their communities… and these are now online. So if you want to make sure that you don’t get left behind and continue to remain competitive in this space, take note of what’s going on in the Property Technology (or Proptech) space, because the winds are changing. And they are changing toward user collaboration and peer-to-peer models.