More than £100 million has been paid ‘up front’ by wealthy tenants to landlords since the beginning of January 2015, according to London letting agents E J Harris, with people paying the entire cost of six or 12 month tenancies and deposits in advance to nab homes in London’s most affluent postcodes.
Making use of research from their own client database as well as wider industry statistics, E J Harris have examined the reasons behind the increase in ‘up front’ rental payments. They looked at who these renters are and the top 10 most popular places in central London where tenants will battle to outbid each other in order to rent a particular property.
The total annual rent from Prime Central London private rentals during 2014 was £510 million, calculations from market intelligence company Dataloft have revealed. Currently, the average weekly rent for a luxury home in central London stands at £3,500 per week (£182,000 per annum).
In a normal year, in Prime Central London, one in ten tenants pay their whole rent and deposit ‘up front’ in order to secure the property they are after. In 2015, though, this figure has already leapt to one in five tenants.
This growth in ‘up front’ rental payments since the beginning of 2015 reflects the current hive of activity in the capital’s lettings market. With the general election less than a month away, worries over stamp duty and mansion tax have transformed vendors into landlords and buyers into tenants as central London’s £2 million-£20 million sales market has held up and been substituted by a thriving lettings market for properties within the same value range.
The surge in ‘up front’ payments has, in part, been down to the increase in well-off overseas tenants who are happy to pay everything in one go in order stay anonymous and not undergo credit checks and personal references. In the past, the high end of the central London rental market was traditionally dominated by rich business people plying their trade in the City or Canary Wharf, plus those from the USA, France, Italy and the Gulf states.
In the last few years, however, this wealthy elite has been joined by a new group of affluent tenants from Russia, the Ukraine, Nigeria and China. These new kids on the block have been “game changers”, eager to pay their rents up front and willing to shell out as much as £10,000 per week on a luxury London pad.
The top 10 locations for up front rental payments in London are: Mayfair, Belgravia, Knightsbridge, St James’s, Soho, Fitzrovia, Marylebone, Westminster, Chelsea and Kensington.
“The dramatic rise in up front tenancy payments is being driven by several factors,” Elizabeth Harris, Managing Director of E J Harris, said. “Stamp Duty and mansion tax concerns have turned purchasers into tenants and so competition has risen for the best homes which has led to a rise in up front bids.”
“Alongside this the London lettings market has become increasingly international with a new wave of wealthy tenants from Russia, Ukraine, Nigeria and China who are happy to pay their rents entirely up front,” she added. “Despite new lettings coming onto the market, the speed at which new lettings instructions are getting tenant offers has increased dramatically, so the number of available lettings properties is actually lower at the end of each week.”
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