The UK rental and lettings market – an insight

With people moving away from traditional long let tenancies in favour of shorter, ‘hassle-free’ tenancies, we’ve seen a rise in flex-rents over the past few years as the model promises fully-furnished properties and a ‘one click’ contract.

To see how this can benefit property owners, Property Investor Today spoke with Nakul Sharma, chief executive officer of rental property management company Hostmaker, which offers a range of apartments across London on the flex-rents model.

What’s driving the PropTech market disruption of the real estate market?

The investment and consumption behaviors of both property owners and tenants have gone through a major change in the last decade.

For financial reasons mainly, property ownership is now out of reach for much of the populace, and many more are avoiding or delaying it because they don’t feel secure enough in the current economic or political environment to commit their life’s savings into a step onto the property ladder. Furthermore, with many millennials now slower to settle down or start a family, the decision to purchase a home slows down with it, while also fuelling interest in rental properties.

A fifth of the UK population now rent – a number which has doubled over the past two decades. In London, that pattern is even larger, with more than half of the city’s population now renting. As such, there has been a greater focus on providing easier renting solutions that are facilitated through technology solutions. Just recently, we’ve seen an uptake of interest in flexible renting and easy ‘one-click’ contracts.

Technology is changing the way that we buy, sell, rent and service properties, with this being more easily facilitated through online and mobile services. We now have instant access to significant quantities of data, and this allows property professionals to make informed choices based on historical trends and comparable market insights. This push for data itself is being driven by a greater desire for ‘easy to consume’ market information.

Where are the greatest opportunities?

Millennials prefer a ‘plug and play’ approach and are willing to pay a price premium to take away the hassle of looking after their owned assets or rented accommodation. To account for the preferences of the consumer, the market has begun to provide fully furnished, well-designed, ‘smart homes.’ This has spilled over into the contractual and administrative side of the market too, with flexible rental models remaining pervasive in the residential, commercial and professional sectors.

Big urban gateway markets like London – where property prices are down 20% from their 2014-2016 peaks – will continue to draw professionals, and this will keep occupancies high for tenancies.

What does it mean for real estate as a whole?

We will see homes being redesigned more and more to provide greater flexibility in both living and storage.

What sort of investors can benefit the most?

Those that take a long view on London as a global hub.

How/where has the market developed and what can we expect in the future?

Work is now more flexible. Many young professionals work on a contractual basis for a limited amount of time in different countries and cities. They need to be able to leave their property quickly and move into another place where everything is ready for them. They won’t want to be tied into a WiFi contract or restrictive tenancy agreement.

The mid-term and short-term rental markets are becoming mainstream, with traditional real estate agents now trying to provide this service to their customers. Developers too are designing buildings dedicated to flexible apartments, as they understand that higher yields can be reached with this approach. I anticipate that we’ll see large institutional investors become involved in this asset class of high yield residential properties in the future.