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Landlords of sought after lets in London getting 12 months rent in advance, research shows
Price may be falling in some parts of the prime London property market but new research shows that rich tenants are paying the entire cost of six or 12 month tenancies and deposits in advance in a battle to secure homes in London’s best addresses. A typical wealthy up front tenant letting a two bed flat in London's West End on a £3,500 per week let are willing to pay the landlord over £200,000 up front before moving in, according to the research from lettings firm E J Harris. Indeed in the first 10 weeks of 2015 it is estimated that over £100 million has been paid up front by affluent tenants, many of whom are part of a new breed from countries such as Russia, the Ukraine, China and Nigeria. The research suggests they are business people, socialites and students from very wealthy families and are able to pay anything from £9,000 to £10,000 per week on a luxurious residential property in London’s best addresses. In a normal year one in 10 tenants in the prime central London will typically pay their entire rent and deposit up front in order to secure the property they want, however this year this has jumped to one in five tenants. According to the firm this surge in up front rental payments since the start of 2015 reflects the current frenzy in the London lettings market as stamp duty and pre-election mansion tax concerns have turned vendors into landlords and buyers into tenants. The Central London £2 million to £20 million sales market has stalled and been replaced by a buoyant lettings market for properties within the same value range. The top 10 locations for up front rental payments are Mayfair, Belgravia, Knightsbridge, St James’s, Soho, Fitzrovia, Marylebone, Westminster, Chelsea and Kensington. The top London address for up front rental payments is Mount Street in Mayfair where over 80% of the tenancies are secured by up-front payments and the firm says that this is because the number of tenants seeking properties on Mount Street vastly exceeds supply. Mount Street is closely followed by Mayfair’s Dover Street, where 70% of tenancies are secured by upfront payments. This is followed closely behind by Eton Place in Belgravia, Trevor Square in Knightsbridge and St James’s square where over 60% of tenancies are secured by up-front payments. In Ward our Street in Soho, Charlotte Street in Fitzrovia, Cadogan Square in Knightsbridge and New Cavendish Street in Fitzrovia over 50% of the tenancies are done by up-front payments. ‘The dramatic rise in up front tenancy payments is driven by several factors. Stamp duty and mansion tax concerns has turned purchasers into tenants and so competition has risen for the best homes which has led to a rise in up front bids,’ said Elizabeth Harris, managing director of E J Harris . ‘Alongside this the London lettings market has become increasingly international with a new wave of wealthy tenants from Russia,… Continue reading
Duty for UK lettings agents to publicise fees welcomed
Measures which impose a duty on UK lettings agents to publicise fees both on websites and in branches have been welcomed by a leading industry organisation. The new Consumer Rights Act stipulates that charges displayed must include a description of each fee and the service it covers and state clearly if the charge applies to the property being let or each individual tenant. The Association of Residential Lettings Agents (ARLA) said that it supports the view that letting agent fees should be transparent and this will help consumers understand what services they are paying for. ‘In the interests of consumer protection, we would have liked to see legislation go further than it did and continue our call to make it mandatory for letting agents to be members of a client money protection scheme,’ said David Cox, managing director of ARLA. ‘We urge the next government to review this after the general election as the schemes provide guaranteed protection to both landlords and tenants should a letting agent abscond or misuse any money they are holding for either party; such as a deposit or rent,’ he added. However, the association, which backs the eradication of unnecessary bureaucracy and red tape, it believes that further measures outlined in the Deregulation Act will have a detrimental and unintended effect on the UK lettings market. ‘ARLA greatly welcomes the new tenancy deposit legislation contained within the Act. However, the provisions in the Act designed to prevent retaliatory evictions by landlords, creates a number of unintended consequences,’ said Cox. ‘ARLA supports the principle of legislation seeking to stop landlords from evicting tenants in response to a genuine disrepair issue. The measures will mean that protections previously afforded to compliant landlords may be eroded by dishonest tenants using the new powers to defend against legitimate possession proceedings, possibly by intentionally causing damage to properties,’ he explained. He pointed out that Section 44 of the new Act, relaxing the restrictions on the use of residential properties for short term lettings in London, will have an adverse effect on the capital’s long established and unique communities. ‘The added ability for residential homeowners to use their properties as ‘pseudo-hotels’ will lead to a constant churn of short term tenants, eroding the foundations of existing communities. Moreover, the new measures may lead to longer term, more established tenants being forced out, an increase in anti-social behaviour, reduced security and an increased risk of crime for permanent residents. London’s success is predicated upon its varied but long established community identities, coupled with the ever growing strength of its booming lettings market,’ Cox added. Meanwhile, the National Landlords Association (NLA) is claiming a victory for landlords in Liverpool after gaining two significant concessions from Liverpool City Council (LCC) in the run up to the launch of their city wide licensing scheme. Although the council has refused the NLA’s request to postpone the launch of the scheme that is due to go live on… Continue reading
Apartment prices likely to remain high in Hong Kong despite promise of more supply
The Hong Kong government has signalled that it is determined to tackle the imbalance between housing demand and supply and confirmed that it will make residential sites available for construction. This year’s land sale programme will inlcude 29 residential sites and the Hong Kong Monetary Authority has announced a seventh round of cooling measures for the residential small to medium sized apartments market which is likely to reduce transactions in the short term. Most of the enw residential sites are likely to be in the New Territories and provide around 16,000 new homes. Taking into account land supply in general it is expected that some 19,000 units could be provided in 2015/2016, meeting the government’s supply target. According to the latest monthly Hong Kong Review report from Knight Frank prices in the small to medium sized sector have been rising since 2010 despite the implementation of various cooling policies. The international real estate firm thinks the latest measures may affect sales in the coming months but will have a limited effect on prices due to strong demand from first time buyers. For residential properties worth HK$7 million or below, the maxium Loan to Value ratio (LTV) has been lowered to 60% from the previous 60% to 70%. For borrowers buying a second property the maximum debt servicing ratio has been lowered from 50% to 40%. Office sales have also been slow. In February only a few major transactions were recorded, but the report says there were signs of investors returning to the market. Grade A office prices in major business districts have not seen notable growth since the end of 2014. ‘However, rental growth is expected to support capital appreciation and we expect investors to continue to increase their focus on the office sales market this year,’ the report explains. In the office leasing market divergent trends have been seen. On the one hand finance, insurance and medical beauty companies are continuing to expand and driving up office demand. But sourcing and logistic firms face intense competition from cities such as Shanghai and Singapore and prefer to relocate to reduce costs. ‘Looking ahead we believe Grade A office rents on Hong Kong island will continue to increase in 2015, mainly driven by strong demand from companies looking to expand in these areas with limited supply and where vacancy rates remain low,’ it concludes. Continue reading
