Tiny demand from tenants as landlords still chase Olympic gold

Landlords hopeful of hitting gold in the Olympics by charging four times normal rents are continuing to inundate letting agents.

Many are making it clear that they are prepared to turf out existing tenants in their pursuit of cashing in on the Games bandwagon. Shelter has expressed its serious disquiet.

There are also reports of rents being hiked during the Games for existing tenants. One tenant said a clause had been added to his rental contract saying there would be a minimum increase of four times his current weekly rent during the Olympics, and twice the weekly rent during the Paralympics.

A number of agents in London have launched lettings properties available for the Olympics, including Foxtons, which has 1,100 properties available at rents of up to £100,000.

But so far, tenancy demand from Olympics visitors appears minimal.

Lucy Morton, head of lettings at central London agents WA Ellis, said: “We are now receiving inquiries in their droves about lettings over the Olympic period. Interestingly, 90% of these inquiries are coming from landlords, which tells a story in itself. At the moment, there is very limited demand from tenants.”

She went on: “In my opinion, it is the hoteliers who will benefit from increased occupancy and rates and not the majority of landlords.

“The clear advantage is that the average increase is 400% of the long-term rental value, but this may vary depending on the property and location.
 
“However, the major drawback is the void period running up to the let, and more importantly, following the let. 

“If long-term investors jump on the Olympics bandwagon and launch their properties back on to the market in September, there is a strong risk that there will be a sudden surge in supply of properties available, without the demand. 

“We are already noticing a reduction in demand levels. I believe that the lettings market plateaued in October 2011 and in some areas is now marginally dropping. The reason for this change in market conditions is that the City is not employing its normal influx of expats and it is these tenants who underpin the lettings market.

“With the economic outlook looking bleak, this situation is not going to improve, and therefore the market will not be able to cope with this extra supply which could drive rents down.

“In addition, anyone wanting to let during the Olympics will also need to apply for planning permission to let their property for less than 90 days. Without it, they are breaking the law and could be fined up to £20,000. 

“The future sale of the property could also be affected as any enforcement notice will be registered as a legal charge and this may deter future buyers. 

“A short let may also invalidate some insurance policies. If the rent is under £1,923 per week, it will become an AST (Assured Shorthold Tenancy) and therefore a Section 21 notice must be served. If the tenant refuses to leave, they may be able to stay for six months until court proceedings can be initiated.

“The final major risk is wear and tear. Landlords can’t be sure that the tenant will treat their property as their home during this short period. No deposit will cover the replacement value of furniture and fixtures and fittings, let alone any replacement of carpets or redecorations.”

Morton said: “My advice is to ignore the hype and temptation, unless the current tenancy is actually coming to an end in July, or unless you are a home owner who wants to avoid the Olympic gridlock in London and flee to calmer and possibly warmer climates.”

At Shelter, Kay Boycott, director of campaigns, policy and communications, said: “We’re beginning to see worrying signs of the pressure-cooker effect the Games could bring, including some indications of landlords looking to evict their current tenants in order to let their homes to Olympic visitors this summer.

“It’s absolutely vital that anyone who thinks they could have problems seeks advice immediately.”

HMRC has also warned that it will be scouring lettings adverts and websites to ensure that all taxable income is declared. Penalties would be up to 100% of the tax due. A spokesman said: “Around special events, such as the Olympics, we want to make sure that people who decide to let their properties, or parts of their properties, for short periods are declaring and paying the right amount of tax.”