You may have heard that Airbnb and property management company, Lavanda has closed a £1 million angel investment round.
Backers include Purplebricks CEO, Kenny Bruce. We have been talking about the rise of short-term rentals for a while, so is now the time that the market explodes?
From holiday lets to short-term residential
Only a couple of months ago, it was announced that RIghtmove founder Harry Hill was to become Lavanda Chairman .
Now, with Kenny Bruce and other big names backing the PropTech startup, it is clear that a lot of successful people have a lot of confidence in Lavanda’s business model.
But it’s not the Airbnb property management side that has the investors excited, it’s the potential for disruption in the residential property market.
Kenny Bruce had this to say about the company's future:
“Lavanda’s innovative proposition to tenants, landlords and estate agents creates genuine value for all constituents. By tapping into the changing way people are living and working, this business has the potential to develop into a major player within the residential market. I’m delighted to be involved at this exciting time for the company.”
Lavanda’s co-founder, Guy Westlake, commented:
“Shorter-term rentals and the sharing economy are shaping the future of the residential property sector. This is a seismic shift, yet the industry is proving slow to adapt. Our platform now provides estate agents and property managers with an immediate means of tapping into this growing market.”
Harry Hill describes Lavanda as having a ‘first mover advantage’, and I would agree.
We have an increasingly transient population and long-term accommodation does not fit into the lifestyles of many. Assuming this trend is to sustain and grow, which seems likely given modern attitudes towards remote and flexible working, whoever can get to market first and offer affordable, fluid short-term rental solutions has the potential to become a household brand.
Given that Lavanda already has Rightmove and Purplebricks pedigree behind it, it’s likely the chances of achieving great name recognition and service association have increased.
Traditional property reacts
The sharing economy of our transient population cannot be ignored by the property industry.
It is leading to the biggest lifestyle shift we have seen in generations, and the way people are choosing to put roofs over their heads is a key part of this. It was only a matter of time before a short-term holiday lettings specialist (most of whom work with Airbnb rentals) pivoted their model to face the residential market.
It’s not surprising that the first party to act is one made up of PropTech, not traditional property, DNA (Hill, a former Countrywide chief executive, speaks fondly of Purplebricks, but is often damning of Countrywide and their ilk).
But traditional agents and firms are going to have to react to this movement, somehow. It will require the cooperation of private landlords and support from property management companies, but not everyone wants to commit to a six month contract if they’re only sticking around for six weeks.
If traditional property doesn’t begin to offer a short-term alternative, it will lose more and more clients to companies like Lavanda and Harry Hill’s comments that Countrywide were suffering from a ‘market share disaster’ may start applying to the traditional market as a whole.
Us and them?
If traditional property hesitates with short-term lettings, it could contribute towards a strong sense of ‘us and them’ in our society.
On one side, we have those with low to moderate incomes, ‘stuck’ in the rental market for eternity; they will go straight to the tech solutions that are offering them affordability and fluidity.
On the other side will be the wealthy homeowners who, in a circle of decreasing size, will pass property between each other with the aid of traditional surveyors, brokers and agents.
When considering the importance of being present in the rental market, there are two commonly agreed projections:
• By 2025, more people in the UK will be renting
• The population, especially the younger generations, is going to continue to become more transient.
Both projections are good news for Lavanda and will contribute towards its quest to become a household brand.
Established property companies need to find a way to compete in this new market. If they don’t, they risk becoming exclusively a service for homeowners, people of means.
Although having a client base of wealthy people is far from a bad thing, it does result in a vastly reduced market share.
In today’s world of swift business and breakneck innovation, targeting a low market share is surely unsustainable, not to mention high risk and, ultimately, short-sighted.