I’ve been writing a lot about the Olympic Games lately, but what about their impact on the London rentals market?
Needless to say, in the lead-up to London 2012, everyone was expecting a huge surge in the population that would drive accommodation prices to a premium. With over a million visitors estimated to arrive for the Games, souvenir stands loaded up their inventories, and hotels jacked up their nightly rates. It was only inevitable that landlords, too, would exploit the opportunity for their properties (especially those near east London’s Olympic Park)—whether they already had London rentals listed on the market or rented out their own homes to escape the hubbub.
For those visitors planning relatively extended stays during the month-long Olympic and Paralympic events, short-let London rentals (i.e., apartments rented out for the short-term, from one week to perhaps six months) were expected to be an attractive option to both save on hotel costs and essentially have all the conveniences of home with separate sleeping, living, and kitchen space.
In any given week during any given year, short-term London rentals are going to go for a premium—that is, their per-week rent will be higher than it would be for a long-term rent period. (The logic is that they aren’t guaranteed to be rented every day of the year, so the higher price compensates for those vacant periods) For the four-week Olympic period, however, landlords were asking rent prices five to ten times their long-let rates (some listings in Stratford were 20 times the amount!). It was even rumored that an “Olympic break clause” was put in effect on the leases of some London rentals to give landlords the right to boot out long-term tenants in time to lease to short-term tourists.
Expecting this windfall, some landlords planned some pretty posh vacations for themselves, assured that they could well afford it. According to The Guardian, for example, one east London couple had heard talk of flats being rented out for as much as £10,000 a week! So they figured they’d rent out their cute little two-bedroom flat for £3,000/week, hoping to fulfil their dream of a round-the-world trip…
…And then London 2012 descended and the visitors didn’t. In the first days of the Games, news reports already showed the desolate streets of what are usually bustling shopping areas and tourist attractions. Museum visitors were 30% down, hotels reduced their rates (a particular one near Hyde Park dropped over 80%, from £500/night to less than £100), and souvenir-stand owners looked just plain bored, with heads resting heavily on their hands as they stood leaning against their counters…waiting.
Even back in the spring of this year, estate agents had warned property owners of the flooding lettings market and high number of as-yet un-let London rentals. Landlord enquiries seemingly outnumbered available agents, who could hardly find the time to get out and view all the new London rentals in person in order to draft up contracts and post them to their listings. One estate agency representing properties in North London claimed only 2% of the hundreds of apartments they’d advertised at a premium for the Olympics had actually been rented as of April. It got to the point where they simply had to stop registering new landlords and ask them to standby instead on an as-needed basis.
What about the Olympic break clause—was that just a myth? Not necessarily. While probably not a widespread trend (some one-year leases with typical six-month break clauses just did naturally end before London 2012 began to delight of many landlords, surely), tenants of rentals have been asked to leave specifically because of the Olympics, though not necessarily permanently. Two tenants in Hackney, for instance (again, according to a Guardian article) were asked to leave only for the duration of the Games or otherwise faced eviction. The request certainly caught them off-guard, but some “Olympic” break clauses on rentals might have actually been negotiated in advance with tenants fully in compliance, wishing to likewise get out of town during the period.
And how about our happy east London couple? Well, as of April, they had dropped their £3,000/week price tag to £2,500 and refused to go any lower than that. I’m not sure what has happened since then, though I’m hoping for their sake they didn’t put any advance deposits down on their global excursion, if that tells you what I’d bet my money on…
According to Landlord Assist, a UK tenant-referencing company, while there has indeed been an active short-let market for rentals in the vicinity of Olympic Park (at least for those landlords with realistic expectations), they’re concerned the exodus to follow the events could leave a lot of landlords stuck with uninhabited properties. As our Econ 101 knowledge informs us, excess supply in the face of low demand ultimately drives prices lower. So it looks like landlords of rentals will lower their rent if not sell their properties at likewise depressed prices.
In a nutshell, it will likely be a tenant’s market in the upcoming months. Yet with landlords forced to drop their rents to attract replacement tenants, demand for these low rents will rise as renters eagerly snatch them up—so only expect this to be temporary. It typically takes the rentals market six months to a year to regain its equilibrium, good news for you if you’re relocating in that time frame!