Getting the most out of the Olympics property market

The central London rental market remains strong. However there are a number of factors that potential buy-to-let investors should be mindful of before entering this market.

Most in demand are one and two-bedroom apartments with potential tenants remaining uncertain about the economy, and opting for a sofa bed in the living room instead of the luxury of a spare room. When buying larger properties for families, the important thing is the catchment area for schools as this can ensure a lack of void periods and achieve the maximum rental yield for a property.

In the same way properties in central London have bucked the trend across the rest of the UK with rises in sales prices compared with falls or zero growth elsewhere, rents have increased by about 4-5 per cent in the last year, which is above inflation. Properties on lower ground or basement levels, next to railways or busy roads can sell and rent in a good market, but are open to longer void periods or lower sales prices in a bad market. The higher the rent, the smaller the number of tenants looking in that price bracket which can also increase the length of void periods, substantially reducing your yield over a year.

Awkward spaces

Make sure you are not trying to add value to a property by overdevelopment, as a property with awkward spaces or more bedrooms will stay on the market as tenants cannot envisage their furniture in the property. If it is sticking then buying space-saving furniture is essential.

Most lenders are insisting on a loan-to-value of 75 to 85 per cent or less. You could pay cash but this would increase your tax liability, so you are better spreading your investment over a few properties and borrowing rather than just buying one. The overall cost of a buy-to-let mortgage needs to be looked at as many low rates come with a large arrangement fee. You should choose a mortgage adviser who can access the whole market and not just one lender.

‘Agent beware'

The London 2012 Olympics is a huge event and a great chance for London to showcase what it can offer. The fact that the capital generates around ten per cent of the UK's GDP confirms its influence and contribution to the wealth of this country. Many companies and business people will no doubt already be planning to capitalise on the 2012 Games. Certainly, estate agents dealing with rental properties in desirable parts of London expect to be approached by some landlord clients wanting to rent out apartments and houses on a short term basis to those coming to the Olympics, intending to holiday in London for a month.

At this point there seems to be more speculation and hype from the media than evidence to support a stream of enquiries from would-be Olympic renters. However ‘agent beware' is the message currently coming from Westminster Council's Planning department.

It is clear Westminster is not keen on short-term rentals for the Olympics, though it falls in line with their wider policy of preventing persistent short term lettings of residential apartments which can be a nuisance.

It seems London landlords' golden window of opportunity will be restricted to the medallists' podium inside the Olympic stadium.

The writer is chairman of Kay & Co. a London-based estate agency.