The future of the UK lettings market: why we invested in Goodlord
We are very pleased to be joining the latest investment round in Goodlord, the property software business that is leading the market in digitising the lettings transaction and making the rental process easy for both tenants and agents.
The UK lettings market represents a significant part of the UK economy. With tenants paying approximately a quarter of their salary on rent in the UK, tenancies drive over £50bn of rental value annually. This segment is also growing. Within the overall housing market, demographic trends are making rental an increasingly significant part of the mix: over 35% of households in the UK rent today, with renting households expected to overtake owning households by 2039.
However, while the rental market is an economically and socially significant entity, it has been one of the slowest portions of the UK property value chain to benefit from digital products. While Rightmove and Zoopla have become multi billion pound businesses by digitising listings, providing renters with direct access to estate agents and their inventory, the rental transaction after that point has remained significantly less digital - a product of the transaction’s complexity, with several stages and often several counterparties (tenants, agents, guarantors, reference agencies, utilities companies, banks, etc.) which need to communicate.
As a result, UK lettings agents, most of which are smaller businesses with fewer than 3 branches, have to process much of the transaction themselves, on excel files, on whiteboards and in long chains of emails with their customers. Some larger agents have purpose built piecemeal solutions, but this leaves the smaller agents (and their tenants), who are the majority of the market, at a competitive disadvantage.
For agents, digitising this process would do more than simply alleviate a headache, it would eliminate a crucial risk. As the rental transaction itself becomes increasingly regulated, the operational burden on agents to protect the rights of their customers (landlords and tenants) has increased: the introduction of regulation concerning client money protection, tenancy deposits, referencing fees and requirements to ensure fitness for habitation have added to the administrative requirements for agents. Providing a digital journey for an agent’s customers, knowing that the journey met compliance requirements, would allow agents to focus on developing their businesses and providing great customer service.
Goodlord is making the lettings transaction a digital one. Agents using the software receive a best-in-class tenancy solution off the shelf and can provide their tenants and landlords with an easy to use digital journey, while being confident that compliance is completed. This is what attracted us to Goodlord’s vision: it is an important solution which solves a real problem in a significant market.
In addition to investing in a powerful vision, we are excited to invest in Goodlord’s team, which has a proven capacity for top quality execution. William, Tom and Donovan have architected a wider team with solid foundations to scale. With a combination of deep property sector knowledge and experience scaling some of the UK’s most successful software businesses, we are investing in a team which knows how to deliver excellent products at scale.
We’re excited to join that team, along with Latitude and Finch, our co-investors, on a journey to change the UK lettings market for the good!
Written by Bob Thomas, Principal at Oxx