" class="no-js "lang="en-US"> EXCLUSIVE: "Which way now for Generation Rent?" - Marios Tsatsos and Kostas Zachariadis, Adjoin Homes in 'The Fintech Magazine'
Sunday, February 05, 2023
Saltedge Report

EXCLUSIVE: “Which way now for Generation Rent?” – Marios Tsatsos and Kostas Zachariadis, Adjoin Homes in ‘The Fintech Magazine’

Adjoin Homes is among the newest of the proptechs trying valiently to solve the dilemma facing thousands who’d like to buy their own home, but can’t. Founders Marios Tsatsos and Kostas Zachariadis know exactly how that feels

You need a big brain to make sense of – and more so to predict – the current UK housing market. Even those closest to it have been serially wrong-footed over the past two years: properties flying off the books, unseen, during lockdown when agents anticipated sales would stall; forecasts of a post-pandemic cooling that’s only now beginning to materialise; landlords cashing in their chips (13 per cent sold up between July and October 2022, according to Propertymark) when you might have expected them to be adding to portfolios as rents hit record highs. In London, they even crossed the average-£2k-a-month pain barrier for the first time.

Whether you’re an active first-time buyer – most likely in your mid-30s – who’s finally saved, or sadly inherited, a minimum five per cent deposit and is now miserably failing affordability tests as lenders move the goalposts, or (more likely) you’re resigned to being a lifelong member of Generation Rent and in a bidding war with another 12 prospective tenants for your next home, you probably feel cheated, even resentful, that others are profiting from property at your expense. There must be a solution, but you can’t figure it out. Enter not one but two big brains, who think they can.

The first is a doctor of atomic science and quantum physicist who, in 2020, had just started a company applying deep learning to data in commercial real estate. The other is a professor of financial economics with a particular interest in market design using game theory – a branch of mathematics that can be, and has been, used in real estate to analyse the impact all the interactions between various actors have on the way that market behaves.

“Ultimately, the aim is to help people on both sides – the tenant and the landlord”

Dr Marios Tsatsos

“In 2020, I had a really good job at a university and a stable income, but still could not buy a home in central London after 12 years of renting,” says Professor Kostas Zachariadis. Given his background, he couldn’t help but think there must be a way for him and thousands of others renting in the city to get something back from their investment (there would be no rental market without them, after all) and perhaps even bring them closer to owning a home of their own. He just needed to harness the right data and hitch it to a pricing model that worked. The vehicle for that was Adjoin Homes, the proptech he co-founded in 2022 with Dr Marios Tsatsos.

Many would argue that the current dysfunctional state of the UK, and, indeed, US housing markets, is a due to an imbalance between supply and demand that could be corrected in the UK by building 145,000 new affordable homes each year to 2031, according to the National Housing Federation and national homelessness charity Crisis, while America is short of five million. While that’s true, Adjoin is among an emerging category of startups in the foothills of what others say is another answer: a home ownership revolution.

It’s what’s been referred to as Real Estate 3.0. The first wave used technology and the internet to give the public access to data on real estate that only the industry had been privy to, and to provide matchmaking platforms for buyers and sellers, landlords and renters. The second wave digitised and accelerated the transaction process, making it a lot more transparent and cheaper to rent and buy. The latest innovations, which include but are not limited, to fractional ownership, could potentially allow millions to share in property wealth in a myriad of ways, in both the domestic and commercial space. There’s less evidence of Real Estate 3.0 happening in the UK than there is in the US; it’s where, for example, former WeWork founder Adam Neumann is now directing his attention with his latest startup, Flow.

“If I’d use Adjoin when I started renting in 2009, I’d have £100k in my Adjoin Wallet now”

Prof Kostas Zachariadis

But Adjoin is typical of them in that it breaks with convention. It believes the question ‘do I rent or buy?’ is academic when you could do both, simultaneously. Its flexible product is not, say Tsatsos and Zachariadis, a digitally rehashed version of traditional rent-to-buy schemes. Instead, the tenant shares in the property price appreciation, relative to a minimum pre-agreed price, as if they had owned part of the home to begin with. Their share is stored in the ‘Adjoin Wallet’, which is used as a discount against the purchase.

“If the value of the property falls, they still have the right to buy, but at the minimum pre-agreed price,” says Zachariadis. “Meanwhile, the landlord enjoys a higher rental income, a tenant with skin in the game, and a potential buyer in place, without having to pay extra commissions or face lengthy negotiations.” The challenge is to strike the right balance between incentivising the tenant and protecting the landlord. That’s where Adjoin’s proprietary AI and data-assisted expertise in selecting properties that are likely to make incremental gains, and forecasting their valuation years hence, is key. The model is still evolving as Adjoin works towards launching a platform, but the team says it will deliver superior yields to landlords while giving tenants security of tenure at a fixed rent while they build up equity.

“If I’d used Adjoin when I started renting my apartment in London in 2009, I’d have £100k in my Adjoin wallet now,” says Zachariadis.

No wonder it’s attracted a waiting list, the majority of whom are high-earning, professional couples with no kids.

“If they hadn’t joined Adjoin, they’d have rented for another 10 years. For them, like me, it’s a 100 per cent loss,” he adds.

Home ownership among young people in the UK has fallen by nearly half over the past 30 years, according to the Resolution Foundation. Before the pandemic, in London, it was taking them an average of nearly 16 years to save a deposit. While the problem is most acute in the capital, half of the enquiries Adjoin has received are from other major cities where the startup’s price forecasting model could be adapted to cater for specific micro property markets. Unlike Divvy or HALO in the US, which are built on a similar wealth-sharing premise but are aimed at a less affluent demographic, Adjoin does not currently invest in property itself. Instead, it works with existing private landlords and institutional property investors.

“It’s actually a good time to put up such a value proposition,” says Tsatsos. “As we enter a recession, we see bigger landlords, institutional developers, who have stocks of flats, interested in our product because it allows them to hedge against a downside. We’ve also seen big London developers switching to rental rather than selling because they think it’s the right time to diversify.”

Given the squeeze on yields and the prospect for many of coming out of fixed buy-to-let mortgage deals into a high-interest environment, many individual landlords are also unsure whether to sell or hold. Adjoin allows them to optimise their strategy and buys them some time. The value is all in the data and the AI property inspections.

“We are not looking for black swan properties,” says Tsatsos, “rather ones that will perform for landlords and tenants who want to sell or buy any time between two and eight years and which will, at least, keep pace with inflation. We have a very specific data model that supports that. “It’s a new paradigm in home ownership,” Tsatsos maintains. “While we give people the option to buy, it’s more than that – it’s the ability to share in housing wealth.”

And that, for Generation Rent, would be a quantum leap.


This article was published in The Fintech Magazine Issue 26, Page 16-17

People In This Post

Companies In This Post

  1. Chris Baker Named Chief Strategic Officer at POSaBIT Read more
  2. Fintech Job Cuts: An Analysis of the Impact on the Industry Read more
  3. Wolters Kluwer’s CCH® Tagetik expert solution recognized by Nucleus Research Read more
  4. Court of Appeal Rules in First Case Over Developers’ Duty of Care to Crypto Asset Owners Read more
  5. Vancity’s Visa credit cards are counting carbon footprints with ecolytiq Read more
Banking Renaissance Sidebar (1)