Renters pay upfront to secure the most sought after streets in London
More than £100m was paid up front by wealthy tenants to secure luxury rental accommodation in central London in the first ten weeks of the year.
Domestic and overseas renters are paying the entire cost of six or 12 month tenancies and deposits in advance to secure homes in London’s best addresses – typically at £3,500 a week.
Before moving, high-end tenants will pay the landlord an average of more than £200,000 up front. This includes £182,000 for the entire rental period plus a £21,000 deposit, excluding any fees payable to the letting agency, according to analysis from agent EJ Harris and Dataloft.
A combination of the high end home sales market reaching the end of a prolonged period of rapid price growth, and the Chancellor’s stamp duty overhaul, which increased the transaction levy on homes worth more than £937,000, along with fears that a Labour win at the general election could result in the introduction of mansion tax, has cooled that segment of the residential housing market.
Potential buyers are renting while they wait for the outcome of the May election, while sellers are renting out their London homes and living in their countryside residence or a pied-à-terre, awaiting anticipated price rises after the vote.
There is also a new trend of trying before they buy in the capital as emerging nationalities, such as Brazilians, start to move over, testing out an area by renting before they commit to buying.
The corporate market is also starting to recover after the global financial crisis, placing more executives in rental accommodation in the city.
This analysis comes just weeks after the Sunday Telegraph revealed that one young Chinese woman in her mid-20s paid £4m upfront for five years rent for an apartment in One Hyde Park, Knightsbridge, as the luxury lettings market boom continues in London.
The top ten 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 more than 80pc of the tenancies are secured by up front payments and fees have risen 25pc since 2013 hitting £1,400 a week.
Mayfair’s Dover Street, Eton Place in Belgravia and Trevor Square in Knightsbridge are the leading London addresses for renters.
“The dramatic rise in up front tenancy payments is driven by several factors. 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,” 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, 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.”