Olympics 2012 – Hassles and Heartache?
September 5, 2011
We recently passed the ‘one year to go’ marker for the 2012 London Olympics. Over the next 11 months excitement will grow in the capital as more obvious preparations begin, and next summer is going to be one to remember.
But the Olympics and their ‘legacy’ extends far beyond that of the games itself. If I could have £1 for every time an existing landlord has asked me over the past few months: ‘is there an opportunity to exploit the short term rental market for London 2012?’…
My response is to consider these facts:
On the positive side
- We are talking about a period spanning 3 weeks attracting millions of visitors to London
- Short lets are typically offered for a number of weeks, attracting a premium of c.50% over the market rent for a 12 month AST
So far, so good? Let’s continue…
- In exchange for the premium rent paid, landlords are responsible for covering all utility costs; electricity, gas, water, TV licence and council tax
- Short lets are resource intensive – tenants will very often expect hotel style facilities and services: TV/DVD, fast broadband, laundry services, regular cleaning, concierge advice; restaurant recommendations, alarm calls, baggage storage etc.
- Letting agent fees reflect the onerous nature of these types of tenants, expect to pay 20%+vat and higher
Early enquiries coming into Young London, our multi award winning lettings agency business, point towards the fact that demand is for a period of a few days at a time. This means that landlords can typically expect at least 3 or 4 changes of short term tenancies over the Olympic Games period. Each change of tenancy involves additional cost for a landlord; a check-in and a professional clean at the very minimum.
Bigger than normal deposits will protect the landlord to an extent. However, consider that with short lets no referencing or credit checks take place. Yes, rent is paid in advance and a deposit held. If you’re faced with a worst case scenario – a property that has been disrespected and damaged, will the deposit cover replacing major items of furniture, repairs to kitchens, bathrooms? And what impact will this have on other short term bookings that you may have had over the period of peak Olympic demand?
Damage concerns aside, let’s make a positive assumption that you have found three tenancies for the period of the London Olympics 2012 – what happens after this period?
The athletes and spectators have vacated Stratford in their thousands. You, and a multitude of other landlords will want long term, quality tenants for a period of at least 12 months. Supply is likely to outstrip demand in the short term as properties made available for short term let during the Games are competing for long term tenants. This always results in landlords fighting for the best tenants – how? Money talks – the market rent becomes artificially depressed in the scramble to minimise voids.
In conclusion then, my advice is firmly as follows:
Take the long term view, retain quality tenants that are looking to stay in your property for one to two years. Dealt with in the correct way, they will respect your asset, pay on time and have sensible discussions at renewal time about the prevailing market rent. Above all you’ll get to watch the 2012 London Olympic Games without property-related hassles and heartache.