Demand for Rental Properties creates Bidding Wars

This article first appeared in the Times - Wednesday August 11 2021 - Melissa York

The only thing worse than being gazumped on a home you want to buy is being gazumped on a home you need to rent. Bidding wars may be commonplace in Britain’s frenzied sales market, but they are becoming the norm in lettings too.

The post-pandemic landscape has changed. Landlords are selling to make the most of record house prices or they have pivoted to letting their properties on a short-term basis on platforms such as Airbnb to escape taxes, regulations and make money out of the staycation boom. The result? Fewer properties available to let long-term and tenants are having to outbid each other on the monthly rent to find a place to live.

Social media is full of tales of rental heartbreak. Tracey Pearce(@elementalturtle) wrote on Twitter how she lost out on an £1,800-a-month house for which she had bid £2,000 a month after it went to a tenant who made an even higher offer. She wrote: “We were facing homelessness with four kids as our current landlord had sold our rental but the letting agent thought it was a game and got angry when I cried.”

Another Tweeter, B (@BeeSansMerci), wrote: “We put in an application on a house, landlord picked us, we were on our way to estate agents to sign and put down the deposit and in that time one of the rejected applicants offered an extra £50 a month and the estate agent gave it to them instead. Cried for days.”

There are stories of letting agents telling tenants not to bother applying unless their salary is 40 times the rent. Tenants say that letting agents have even led group viewings that ended with a bidding war in the garden.

Imogen Tew, 25, has rented in London for seven years, but she was first asked to make an offer for rent in June 2020 after the first national lockdown when she was looking to move in with her boyfriend. Tew was outbid on one property in Blackheath, southeast London, and another went to a tenant who could move in quickly, so she realised that she had to up her game.

Tew offered asking rent with a two-year contract, rather than the standard one year, to secure her present flat and ended up paying double rent for a few weeks to bring the moving-in date forward because “no landlord would wait two months for us to move in, even though that is the standard notice period. It felt like the same stress of buying a house, but with none of the benefits of homeownership at the end of it.”

Contrary to popular belief, rents stayed strong in most towns and cities during the pandemic. According to the flatshare website SpareRoom, they increased in places such as Sheffield, Plymouth and York. There were only five areas where rents fell by more than 1 per cent in 2020; London’s average rent fell by almost 10 per cent between the end of 2019 and mid-2021, but it has bounced back in the past three months, SpareRoom reports, as office workers trickle back to the capital.

Tenant registrations rose from 91 in June to 415 in July at the London estate agency Bective, but there are just 83 properties to rent on its website. Across England there are about 4.7 million private rentals, but only 168,634 of these homes (3.6 per cent) are on the lettings market and actively seeking new tenants. The figures from the buy-to-let specialist Sequre Property Investment show that supply is lowest in the southwest of England. Out of about 520,000 private rental homes, just 7,802 (1.5 per cent) are available to rent there.

“Letting agents are seeing what they can get away with charging by inviting renters to make bids,” says Dan Wilson Craw, the deputy director of the campaign group Generation Rent. “As a renter, this can cause a lot of stress, but you should work out what you can afford and stick to your guns.” He adds that renters who offer more than 40 per cent of their salary are likely to fail the agent’s affordability checks anyway. SpareRoom reports that tenants are spending 39 per cent of their salary on rent on average in London and Oxford.

Rental bidding is legal in the UK — although it was banned in New Zealand in February this year — but letting agents should not ask for bids after a deposit has been paid because it is now against the law for them to take more than one holding deposit at a time.

In Oxford there are 22 applicants for every available property to rent, says Holly Leeson, the head of lettings at Hamptons in the city, “and that’s before we’ve even put them on Rightmove. We had one under offer before we had even taken a photo of it.”

Demand is sure to increase once students return to the market in the next few weeks, but Covid uncertainty means that there are fewer inquiries than usual, Leeson says. Instead, the rental market is flooded with families who sold up but can’t find anything to buy, while landlords are selling at an alarming rate. “The lack of stock is quite concerning,” she says. More tenants are also staying put. “I think the government [eviction] notice period extension hasn’t helped. People are more aware of a landlord’s lack of options. Also, where else can they go?”

Mark Hayward, chief policy adviser for Propertymark, said: “This is echoed in Kent where we are seeing the impact of those looking to relocate away from London. Agents are saying between 30 per cent to 50 per cent of rented properties are going for over the asking price.”

To landlords, security is as important as money. To stand out from the crowd, tenants are learning to flaunt professional jobs and stable relationships to make their application more appealing.

Georgie Bass, 31, says that she offered £50 more a month to rent a home in Richmond, southwest London, with her teacher boyfriend, James. “I would always refer to him as my partner rather than my boyfriend,” she says. “I’d mention that he works in a school, like a professional, because I’m in public relations, so I must seem like something out of Ab Fab. I even started talking about joining the local tennis club because I wanted them to think I was legit. It’s totally mad.”

Prospective tenants are routinely handed forms to fill in on viewings asking for “offer amount”, the tenants’ household income, whether they have pets or children, and there’s often a tenant statement box where they must make a heartfelt plea to the landlord.

Filling in the “tenant request” box is risky. Miranda Kyte, 26, says that she viewed a property next to Finsbury Park station in north London that she could only describe as “a bachelor pad; red walls, black pleather furniture, too many sofas for the space”. When she asked whether the big slash across the black pleather headboard in the bedroom would be replaced, “the letting agent said you can put that in your requests box, but the more you put in there, the less appealing your offer will be”.

Desperate to stand out from the crowd, tenants are even hiring property agents to find and negotiate on their behalf. “I’ve got ordinary people on my books — nurses, firefighters, police officers — who need help getting somewhere so they can start a job,” says Michael Kleinman, who set up Cornwall Property Consultancy while on furlough last year. The lettings market is so hot there that he knows one landlord who demanded his tenant paid a year’s rent upfront or he was going to put the rent up by £200 a month.

Kleinman viewed a “basic” two-bedroom house recently that attracted more than 400 inquiries. “That’s not uncommon. It’s a nightmare to even get a viewing now. We’re talking bog-standard properties. Nothing exciting about them.”

He charges a £500 upfront fee, plus one month’s rent at the start of the tenancy. He says: “I didn’t intend to deal with rentals when I started because I didn’t think anyone would pay it. But I had a few inquiries and it’s 50 per cent of my business now.”

Kleinman is also helping his fair share of homeowners who sold up for a sunnier life in Cornwall but found that there wasn’t anything left to buy. With money in the bank, they are happy to bid over asking rent to secure somewhere while they wait for more homes to come on to the market.