The Coronavirus (COVID-19) has had an undeniable effect on the travel. Flight operators have cancelled flights, are running on a more limited service and some have even gone bust. Bookings are down in London’s hotels but what about the growing short let holiday sector?
Over the past couple of years there has been an explosion of ill thought out operations where “service providers” have been born overnight renting as many flats as they can, subletting them on Air BnB and similar platforms and pocketing the difference.
As an agent having looked into the financials of a number of these start-up operations it is pretty clear they are not built on solid financial footing. When all is going well the potential returns are very good, an apartment rented for £500 on an AST if managed right can bring £900 a week. If you choose (as many do) to break the law and the 90 day rule it can be quite profitable. Many believing the good times will never end have expanded their portfolios and at quite an unsustainable rate.
With the lack of travel and amount of cancellations are they going to be able to meet their obligations to pay rent? With no visible end in sight and with things likely to get worse before better I have heard of a few big and small players in this market who already have decided to not pay the rent due on the 1st of March and instead hand back the keys. I suspect as things continue to escalate more will follow suit.
What does Coronavirus mean for the London rental market?
What does this mean for the London rental market? I do not expect rents to fall as there remains a chronic shortage of central London long term rental properties. That said, an influx of properties available to rent will be gratefully received by thousands of people actively looking for a long term rental home.
I do not expect this to be the end of the holiday let market but a correction is needed and long overdue. It has become difficult for the locals to find long term accommodation and it has had a very detrimental social impact on the local community. So from a tenants perspective this is unlikely to see a reduction in rents but they can at least find some consolation that there will be a little more choice, scant consolation for some, and for many others they will be relieved to finally be able to find something to call home.
If you are a landlord who is affected by this problem, please do get in contact. We have a number of corporate tenants looking for properties in central London and when you experience our service levels you may wonder why you ever bothered with the short term high fluctuation holiday market.
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