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Wealthy renters have paid #100 million up-front this year alone to cover their entire tenancy as competition for ideal homes intensifies, it was revealed yesterday (Mon).
With six or seven people chasing every posh London property, bidders are desperate to beat their rivals to seal the deal on a home.
As a result they are willing to pay a full year’s rent, deposit and fees up-front – handing over #200,000 on average to the landlord.
This is based on figures from Dataloft, which says the average prime London home costs #3,500 per week to rent.
In total, around #100 million has been paid up front in the first ten weeks of 2015, which is twice as much as the same period last year.
The frenzy is being caused by the General Election, fears of mansion tax and influx of super-rich escaping Russia and Ukraine, according to letting agents E J Harris.
Stamp Duty has also turned vendors into landlords and buyers into tenants as the central London #2 million to #20 million sales market has stalled.
A number of these rich people are happy to pay their entire tenancy up front despite the properties costing them around #10,000 PER WEEK.
The top ten locations for up front rental payments are Mayfair, Belgravia, Knightsbridge, St James’s, Soho, Fitzrovia, Marylebone, Westminster, Chelsea and Kensington.
On Mount Street, in Mayfair, more than 80 per cent of the tenancies are secured by up-front payments with lettings values rising by 25 per cent in the past two years.
Elizabeth Harris, managing director of E J Harris, said: “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.
“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.
“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.”
The mad market has been highlighted by a number of eye-opening deals. A one-bedroom Mayfair apartment was snapped up by a desperate tenant in a record-breaking 40 minutes.
An a wealthy young man paid #400,000 up-front to rent a luxury flat only to love the place so much he bought it three days later – for more than #10 million.
Mark Tunstall, managing director of Tunstall Property, added: “They have the financial wherewithal to sidestep the referencing requirements usually imposed by landlords by offering up-front lump-sum payments.
“Whilst global interest rates remain at historical lows it is of little consequence if those with substantial liquid cash reserves have to pay their rent in advance.
“And similarly, it doesn’t confer the benefits on landlords that it used to do, when they would often accept a discount on the asking rent in return for the benefit of a slug of cash which they could then invest profitably elsewhere.”
ENDS