Has the Olympic Property Rental Bubble Burst?

June 7, 2012 - PRLog -- For many months, some agents and elements of the media were predicting a gold rush - not for medals, but hard cash generated through ludicrous and unrealistic prophecies of stratospheric rents achievable during the Olympics. Many blue chip firms set up specialist Olympic Lettings Departments, but staff have been replaced by tumble-weed and most are now little more than a hyperlink to an established short lettings department.

I was always sceptical. I just couldn't see how even at the multiples of rents suggested, it was viable if done properly and legally. 25% in agents fees, twice the usual administration fees, at least 20% in tax, preparation, cleaning, insurance, and of course the inevitable void period immediately before and the unpredictable void period after, the figures still failed to impress. There were also huge risks. What if your existing tenants simply failed to leave and a family from Florida arrived having paid many thousand of pounds only to discover their accommodation occupied? Not a happy thought. What if your lovely two bedroom apartment was stuffed to bursting with backpackers partying long into the night?

This morning, I searched for an 'Olympic Let'. There are thousands of available properties and prices are falling faster than those of Greek villas. In fact, there are more properties available in Stratford than we have properties available across the whole company. Yet still, we have sales and rental offers which have been declined in East London as owners are still holding out for the promised riches. I find myself wondering at what point will people waken to the smell of freshly brewed coffee. Time is running short and stock remains very high.

Yesterday, we received a call from USA - a lady looking for accommodation for a family at £400 per week. That's a figure lower than we would expect for an AST for the accommodation requested. In fairness, some properties have been let for the Olympics, but mainly to companies, broadcasters and journalists all of whom have strictly monitored budgets. One, when told their offer was successful, replied, "Great new - remind me which property was that?". They had offered an an undisclosed number and decided to go with whichever landlord accepted the lowest offer.

Many people who have contemplated selling have delayed the decision making process until after the games. There appear two primary reasons. The first is the optimistic hope that the Olympic legacy will lead to increased values, the second, and more pragmatic view, is that not much will happen between now and September. Both views are mistaken.

Soon, perhaps as soon at the opening ceremony, Landlords will realise that the Olympic dream is the preserve of those taking part and that the promised tenants just aren't going to materialise. Frankly, who is going to spend £100's on tickets and risk a last minute booking for accommodation. As void periods start to lengthen as a result of an unprecedented increase in supply, many will consider selling their properties and the same supply demand curve will bite. May was our busiest month for 2 years and we recorded the highest number of new buyers registering for nearly 4 years. With more stock, we would have sold and rented more.

Press reports claim that rental prices are falling. Our view is that perceived rents being sought have fallen because agents starved of stock by Landlords holding out for a last minute call from someone lucky enough to get Olympic tickets and with nowhere to sleep has lead to many agents overvaluing to get instructions. This has been compounded by the number of tenants staying put as they simply cant find anywhere else. It was this which caused rents to rise to a noticeable degree as tenants would rather pay an increase of 5-10% and stay where they are rather than risk ending up with nowhere. As the number of tenants looking decline, so will the premium over valuations borne from desperation. Actual rental values have remained reasonably consistent.

The phrase "Well, if they don't agree to an increase, I will put it on the market for an Olympic let," was not uncommon. Likewise, the fear factor from the press reporting that Landlords were serving notice to gain possession in time for the games was adding fuel to the fire. We even had one lettings offer declined when the Landlords 'Olympic agent' promised a last minute rush. Common sense sadly did not prevail. That was two weeks ago and not one viewing, enquiry or telephone call has materialised.

Come 27th July, as Catherine Jenkins and Sir Paul McCartney belt out patriotic tunes, many landlords will realise that no one is coming and the usual tenants upon whom they rely will be happily settled in their homes watching the whole thing on television. They may even invite some friends over who have tickets for the games. You see, the truth is, London is an international, cosmopolitan community and many visitors will have family, friends or friends of friends happy to share their homes. My cousin looked for accommodation for a roughly 15 minutes. This was followed by an email saying "See you on 27th - will bring sleeping bag and beer." It works for me and is not taxable.

The lead up to this unique event has been a fascinating thing to watch in terms of the effects on the property market. Optimism, even greed seems, as a rule, to have failed spectacularly and instead, those with good tenants, a long term view and a pragmatic stance will end up the real winners. It endorses the wise old adage; If something seems too good to be true, it usually is. It seems like Dick Whittington wasn't alone in his wishful thinking after all.

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