A history of the rental market…A version of the rental market has been around for a very long time indeed. Way before the rental market as we know it today there have been references to landlords and tenants in the Code of Hammurabi, written on old baked clay tablets dating as far back as 1792 BC! Then following the fall of the Roman empire Britain needed a new way to organise society and so the Manorial System took hold. Peasant tenants would work and fight for the ‘Lord of the Manor’ in return for a roof, and some semblance of protection (although they were the first to be called upon to fight when required!). The Manorial system was a smaller part of the Feudal System, where nobles were given land in return for allegiance to the King Of England and committed to military service of the King. Not a particularly equitable society at all. The signing of the Magna Carta in 1215 paved the way for citizens achieving individual rights, and in turn the first parliament of England. Quai Emptores began to monetise England, as people would then be able exchange things in return for money which was the beginning of trade and commerce. In 1709 the Landlord and Tenant Act brought legal responsibilities to both parties and eventually in 1988 the UK Assured Shorthold Tenancy Agreement was brought into being, cementing tenant’s rights in Law. So the rental market has evolved a very long way from these early days, and renters now have rights and responsibilities much like landlords. Many of these early changes were driven by a changing zeitgeist; a shift in the cultural, religious and societal norms of society. Today the changes we’re seeing in the market are exponential in nature, and fuelled by advances in technology. For the purposes of this post, lets look into more recent history and limit us to 20 years or so, as this more seems relevant to us all.
How the internet changed property sales & rentalsBack in the day (oh the 19’somethings) you used to look for adverts for flats or houses to rent in your local corner shop, the post office, and perhaps even in the classifieds found on the back pages of the local paper. For renters, this made it difficult to get a good sense of what was available on the market, and likely meant that your property search was a fairly local and one with pretty limited choices. It also meant travelling to the area to specifically pick up the local papers, where you would normally get drawn, like a moth to the light, to the local lettings agents’ windows with photos of available rentals in the area. Having been shown what you might be able to afford you would then pop in and take advantage of all that local knowledge. Lettings agents certainly do know their local areas, street by street, and park by park and have been an invaluable source of information for potential renters around the UK. And, after some back and forth with the agent, perhaps after only a few viewings you would be signing on the dotted line and moving in. Then along came the internet, and shook everything up. The internet, just like the printing press had done before it, rushed change through every industry around the world, making information easier to access, more transparent and instant than ever before. Again this was about access to information. Old established businesses evolved or evaporated, and that very big earner for local newspapers dried up. Everything went online, classified websites jumped up all over the place, with businesses like Loot and Gumtree leading the charge. Interestingly these were never set up specifically for property rentals, but instead a multitude of categories from dating to car sales, furniture to sports equipment sales. The online battle for eyeballs ensued with one clear winner here in the UK being Gumtree, and a global winner in Craigslist. Anyone could find anything on these amazing new websites, and people could buy and sell at whim. Landlords and agents took to advertising property on these websites, and renters took to looking on them. It was a match made in heaven, (apart from all the scams and emails telling you that you had won a windfall of lottery money without knowing it or that some distant prince needed to hide millions in your account and would offer you a commission fee in return for your help). However flawed, it offered a faster more convenient way than anything existing previously. This was the dawn of the internet in property rentals. However, more recently this space has been almost entirely co-opted by a well known duopoly here in the UK; Rightmove and Zoopla. Over in the USA the same space is dominated by Zillow and Trulia (now seen as one company after a recent merger). Zoopla launched in the UK, to the fanfare that its new technology would change the industry. It was pushed as one of the early technology innovators in the property space, but I’m less sure about this. The collision of technology and property (or Proptech), has been going on for a very long time. Word of mouth was disrupted by the printing press, which in turn was disrupted by the Internet which gave tenants access to more information about properties faster. Those business that have led the way with technology in this space will too be disrupted by another exciting innovation, an open and transparent collaborative economy where the information is not just about the property but also the people that you are dealing with… but more on that later. So although on the outside these business (Rightmove and Zoopla) might look very different to traditional media companies, they are actually very good ad-funded media businesses, or what we might like to call ‘Adtech’. Their business model has been charging buyers and sellers to connect, and because they could scale nationally they could offer more to renters looking to move, and more eyeballs for agents. So in all, a win win. But their entire model has been reliant on the agency model, and relying on the fact that those agents would acquire local landlords and property. This is why the legacy of online classifieds has remained in force, because there is a large number of landlords that are unwilling to pay the agency fees, and so are looking to self-manage their properties; i.e. the private landlord. This is why websites like Gumtree have offered free classified adverts for landlords, in return for the ad dollar created from 3rd party businesses who advertise on the website. The sites have not been designed for any specific audience, and instead their general appeal has meant pretty solid ad revenue from many advertisers. So we have had 2 main forms of looking for property from a renter perspective for years. Rightmove and Zoopla have been offering agency properties and Gumtree have been offering properties that are direct from the landlords.
The future of the property marketBut times are moving on, and as customer awareness increases, online communities are able to share knowledge more quickly, social media has redefined the boundaries of many business, and customer expectations are so vastly different to what they were only a few years ago. Renters should now find themselves in a position of power. Technically speaking they should have consumer power but have been unable to leverage this because they have been separated and not given a voice. Rightmove and Zoopla are unlikely to want to enable renters to rate agents because it might put people off using them, and then Gumtree is not focussed on renting specifically, and enabling reviews would move it toward Ebay and further from a classified listings website. Access to information seems to be the driving force behind innovation for the users here, and as renters we are not only asking for information about the property but that of the person they are dealing with. At last people are really beginning to value their online reputations, and are able to share them to get more business. Younger people are less concerned about online privacy, but instead demand to know more about the person at the other end of the transaction. Welcome to the customer collaborative economy where users help one another with open and honest reviews to make the right decisions. Pretty shortly you will not be renting or buying from people that have poor reputations online. There are technologies that are coming to market now that would not have been possible a few years ago. Cloud computing, agile web development and the financial barriers to entry have dramatically shifted, resulting in lots of new players in the space. Property portals offering the same agency sourced properties have popped up left, right and centre over the last 12 months, the largest perhaps being the Agent’s Mutual offering of Onthemarket. These websites are all structured and centred on agency properties, and rely on traffic and lead generation for business. Yep, you got it, its the same old ad-funded media businesses of old – but are they already dead in the water? Online letting agents are replacing the traditional shop window with e-commerce stores, and most of these are quick to list on Rightmove or Zoopla. Examples include Purple Bricks, Easy Property and Open Rent. The barriers to setup an online lettings are now so low that using off the shelf websites it would be possible to set something up in an afternoon, albeit it rather simple in nature. As the services these businesses offer move toward commodity status (ultimately competing on price to list on Rightmove) it means they must excel in customer service and value added features. This is amazing for the end-customer, as it drives down the costs of doing transactions and provides a more convenient way of doing business for the mobile renter, owner and agent. But are they missing the bigger picture; that overarching trend that we are seeing? A move across multiple industries, where web products can disintermediate and offer collaborative solutions for users already exists globally. Take short term rentals, where the hotel industry has been disrupted by Airbnb, and the apparent ‘taxi cartel’ of black cabs has been disrupted by Uber. I feel that we are now awaiting the same sweeping move in the long-term property rental space. I fully understand that some agents offer great services, and I don’t sit here professing they should not exist. Far from it. What I am saying is that bad agents, and bad owners, (alongside bad renters) should not be able to continue to get away with it. With personal online reputations becoming incredibly important over the coming few years, helping users secure business from one another. Trust and online identity are critical to help individuals transact directly, and we are already seeing people invest time and energy into getting a head start in their own personal online brand. Social media has led the way here, with whole industries focussed on helping people leverage their online presence and ultimately do more business. But there are so many other little spaces where technology is colliding to offer more for the end user. Technology in the hands of young entrepreneurs is a great thing, as those businesses will focus on niche areas of the market and carve out market share in the smallest of spaces, offering incredibly focussed products that solve small but very serious market inefficiencies. And the thing is, using tech and the internet these businesses will scale incredibly quickly, dramatically shifting the status quo in the property market making them very interesting investment proposals for venture capital or larger bricks and mortar investment firms. I recently met and interviewed James Dearsley, who in short is one of those leading the charge in marketing in Real Estate using Technology charge here in London.
“Unlike the original uptake of social media in the real estate sector, there is a real appetite for the understanding and use of innovation and technology. The property industry, whether residential, retail or commercial is in perhaps the most exciting period for a long time given the marketing potential of this new area. I would go so far as to say that the very core of the industry will be tested in the next 5yrs.
This is supported the the financial investments that companies are making in the Real Estate Technology field. In Q4 in the US venture capitalists invested $300million in 32 companies. This is the largest quarterly investment ever and was more than the amount invested in all of 2013. This sector is on the move.
There is no doubt that online is the current ‘disruption’ and is the one most understood by realtors, agents and developers. However, we are quickly moving into the period of more futuristic technologies. With Facebook purchasing Oculus Rift, the makers of Virtual Reality headsets, last year, the likelihood of VR becoming a staple of family life is becoming increasingly likely. Keep an eye out for virtual viewings – especially in the new build market as suddenly the immersive nature of VR becomes the ‘killer app’ for futuristic marketing techniques.
Technology and innovation is set to change our industry. Whilst we need to remember that sales and revenue generation is as a consequence of human interaction, it is the very nature of the human interaction that is changing. We need to work out where that is and evolve our businesses to where these are taking place now and where they will be taking place in the next 10yrs.”
To read more opinions from James visit his website on Real Estate Technology
My pick of the best Proptech Startups out thereSo here are a few of my favourite Proptech startups leading the charge here in the UK, both commercial and residential. Now I must say that other than knowing these exciting founders I have no affiliation with them at all and I don’t vouch for their potential. Instead my aim is to highlight that there are some great young businesses in the pipeline, and I don’t doubt that some of those I mention below will make big differences in your lives. Hubble Hubble is another great startup that aims to help young startups like all those above find the space to help them grow. Startups move fast, grow quickly and don’t have the capital to fund long tenures. Therefore Hubble claims to be an online marketplace matching young businesses find office space, dealing directly from those who have it. They focus on co-working, shared offices and private serviced offices within areas of London. Tushar Agarwal, CEO and founder of Hubble suggested
“The power in the property industry is shifting away from the supply side to the demand side. Users of property are demanding that it transform from a fixed and static asset into something that is more fluid and dynamic, to keep pace with the rapid change in traditional company structure (on the commercial side) and the way people live (on the residential side).”
“Property is slowly transforming from something that was restrictive (due to long leases, high upfront deposits and required covenants) to something which is liberating. Prime example are retail entrepreneurs who take up a pop-up shop for a few weeks to test an idea and build a brand; parents whose kids have flown the nest and can make back some income from the spare space in their house; companies who have had to lay off staff can make money from renting their spare desks.
By making property more flexible, you can start to use it to help people, rather than tie people down.”Settled Settled is a new business and one I think that could upset a few very well funded businesses out there. They are focussed on changing for the better the property sales and buying sector by equipping every day people with access to everything they could possibly need to become property experts (removing their dependance on a middleman). The claim to be passionate about getting rid of agents’ fees, which will save those selling and buying their homes £1000s. Gemma Young, one of the dynamic founders at Settled says “Technology has been used to improve so many sectors – holidays, consumer goods, now more recently taxis. Property has been one of the later sectors to go through a disruption but that disruption finally here! Property sales and rentals are some of the most stressful things any of us will encounter in our lifetimes. Seeing how technology can be leveraged to reduce the stress levels and the expense is an absolute joy – we’re delighted to be a part this movement.” Fixflo This is one of my favourite products out there, as it helps tenants report maintenance issues in their rental property (in up to 40 languages!!) making it really quick for landlords to respond remotely. In all this will save you time and money, and yet increase your customer service levels. Awesome, that will help your rental reputation for sure. Property Partner This is a really exciting new startup venture that wants to democratise the property investment space. It enables its users to invest in property as you would the stock market, from as little as £50! You then own a share of the property, receive rental income and if the property rises in value, enables the investor to sell a part of the property at market value and exit. Splittable Another great startup focussing on a niche area of joint living. Splittable helps renters living together to split bills and lets users keep track of those pesky house sharing expenses. So if you’re one of those households that always seems to lose track of who owes who, and what this might be for you.
Nick Katz, founder and CEO was good enough to share his view with us.
“Totally agree with Tush above – the consumer, largely through the awesome power of these new technology platforms, is garnering much more power in the real estate ecosystem.
It’s high time that the people who eat, sleep, live and breath in the properties they pay for should also be able to connect to them digitally, find more creative ways to use that property and uncover beneficial insights from the data new technology platforms can provide.”Hive and Nest This is an interesting one for those landlords out there, I would suggest more specifically for those operating in HMO (aka Multi-Let) space, as you are more than likely include bills in the rent. I know, from having worked in the HVAC (Heating Ventilation and Air Conditioning) industry that heating bills make up the single largest energy cost for households. Renters are, unfortunately, likely to turn up the tropical heat and open the windows if they know they are not paying for it. So control of those radiators is important, as you cannot manage anything you cannot control. I am in no way suggesting that you landlords become Scrooges and turn the heating off but i am suggesting that you can work with your renters to set an appropriate temperature and schedule for the heating so that all parties are happy. Movebubble Ok, so I am a little biased on this one (disclaimer, I am one of the co-founders), but in short this is the LinkedIn for the property rental market helping renters build and share their Rental Reputations with those they want to. Movebubble also helps them to to understand not just about the property, but also the people that they are looking to do business with. (We are currently only operating in London, but we can certainly help the best renters find the best property to rent in London.) Property Tribes Monthly Tech Talk I do a chat every month with Nick and Vanessa of Property Tribes (the best landlord forum out there), called the Digital Landlord, about how landlords (aka Property Owners) can leverage all this amazing new technology coming online today. If this sounds like your bag, then check the Property Tribes Youtube Channel. I have included a recent episode with you here about rental reputations. The point of this post is to show you how this space is alive with innovation, there are so many amazing new businesses that will shape your rental and property lives well into the future. Property as you know it will fundamentally shift in the next few years, whether you like it or not. It’s my suggestion that you prepare, and start using it to your benefit so as not to get left behind.