The Daily Telegraph - Saturday - Money
London renters forced into ‘off-market’ deals
London rental homes are being filled before they are advertised as agents and landlords cash in on a severe lack of properties.
One in four tenancies let by Knight Frank estate agency are now signed behind closed doors as “overwhelmed” landlords opt for secret deals that can be secured at 20pc over asking price.
Knight Frank, which specialises in high- end homes, said that the number of tenancy deals signed off-market in the capital tripled in the second half of last year.
The trend is forcing many renters to pay tens of thousands of pounds in search agent fees to secure a property.
Between July and December 2021, the share of London tenancies signed off- market jumped from 9.4pc to 28.2pc. In February 2022, the share was 25.3pc – higher than historic averages.
Holly Goodge of Savills estate agents in Islington said landlords were increasingly asking for their properties to be marketed for let off- market because they feel overwhelmed by the number of applicants.
“Otherwise, often we have to take properties offline within 24 hours of listing,” she said. “We had a flat in Angel, Islington, last week that had 15 viewings in two hours.”
Richard Davies of Chestertons estate agents said an increasing number of tenants were commissioning search agents to find rental properties for them in an “incredibly competitive” market.
Search agents, which are usually only hired to find properties for sale, typically charge between 10pc and 15pc of a year’s rent to source a property.
David Mumby of Knight Frank said: “In the high-end market, that can mean fees of £40,000 or £50,000. But hiring a search agent now, it’s not about getting a good deal, it’s about getting a house at all.”
Thea Carroll, a London buying agent, said requests for rental property searches had nearly doubled compared with the pre-pandemic level.
“The rental market is so much more frenetic, the time frames are ludicrous. It is a matter of hours – whether or not you can view a property immediately can be the difference between whether or not you can get the property,” said Mrs Carroll.
Landlords have been able to secure sky-high prices for properties without the hassle of advertising them because there is an extreme shortage of supply.
A family home in south-west London recently let off-market via Savills for 20pc over its £8,000 per month guide price. One tenant was so desperate to rent a property in Kensington, west London, he offered to pay £16,000 per week for a two-year lease and pay all of the rent up front. The bill totalled £1.67m. This was £260,000 more than if the property had been secured at its original guide price.
Mr Mumby, who let the home, said: “The tenant knew the cupboard was bare. It is purely down to a major shortage of supply. Pre- Covid, we had 700 or 800 available properties to rent across our London offices. Today, we have 300, and we have the highest number of prospective tenants ever.”
Another tenant secured a house in Notting Hill for £7,500 per week offmarket – an increase of a quarter on what the previous tenant paid.
Hiring a search agent used to be rare in the lettings market and was concentrated only at the high- end, but now 50pc of prime London tenants are paying someone to find them a property, said Mr Mumby. “We just get bombarded day in, day out with search agents calling us,” he said.
Georgina Bartlett of Savills’ Sloane Street office said tenants were increasingly adding sweeteners to offers that include agreeing future rent price increases in their contracts. “On average, that’s a 4pc raise agreed in advance,” said Ms Bartlett.
Demand is fierce for one-bed flats as the surge in hybrid homeworking has brought a wave of demand for pieds-àterre, said Ms Goodge. “There is such a lack of stock that tenants are jumping when they hear about anything.”
One tenant offered £16k per week for two years and paid all rent up front