Wealthy tenants from Russia, Ukraine, Nigeria and China are pushing up high-end rents in the capital by paying for an entire year of tenancy upfront, a new study has suggested.
Upmarket lettings agency EJ Harris said the number of wealthy foreign investors paying annual rents upfront has doubled in the past year, from one in 10 tenants to one in five, as fears over stamp duty and a mansion tax have "turned vendors into landlords and buyers into tenants".
According to the report, central London's £2m-£20m housing market has "stalled", replaced by a "buoyant" lettings market.
Labour has threatened to introduce a mansion tax on houses worth more than £2m, while measures introduced as part of the Autumn Statement mean homes worth more than £2m incur seven per cent stamp duty. The government has also introduced rules meaning homes worth more than £500,000 bought within a corporate envelope – used by many wealthy individuals to hide their identities on the Land Registry – are subject to stamp duty of 15 per cent.
A typical would-be tenant for a two-bedroom flat in the West End will pay their landlord more than £200,000 upfront, the report said, including £3,500 a week rent – £182,000 in total – and a £21,000 deposit.
However, tenants have been "happy" to pay their landlords upfront for rents as high as £10,000 per week, it added. "At this level of the marketplace upfront rental payments can exceed half a million pounds".
Mount Street, in Mayfair, is the top London address for upfront rental payments, with more than 80 per cent pre-paid, which EJ Harris said was down to the number of tenants looking for properties in the area vastly exceeding supply.
Residential lettings in the street have now his an average of £1,400, up 25 per cent since 2013.
Nearby Dover Street is also a hotspot for upfront payments, with 70 per cent of tenancies secured their paid in advance.
Hot on its heels are Eton Place in Belgravia, Tervor Square in Knightsbridge and St James' Square, where 60 per cent of tenancies are paid upfront, and Wardour Street, Charlotte Street, Cadogan Square and New Cavendish Street, where half of renters paid before their moved in.