Once seen merely as a means to an end, property rental has become a dynamic sector that serves all levels of clientele. High Net Worth Individuals (HNWIs) are increasingly looking to rent property and supply is gradually rising to meet demand. Furthermore, United Kingdom Sotheby’s International Realty is seeing an emerging “rent-to-buy” trend whereby homes in prime and super-prime locations are let out with an option to purchase the property at the end of the term.
Against a backdrop of market uncertainty, this reactive solution is beneficial for both tenant and landlord. The “accidental market” comprises standout properties that achieve premium returns due, in part, to limited stock. “We've seen a strong start to Q1, particularly in the super-prime lettings market,” reveals Francesca Fox, Lettings Director at United Kingdom Sotheby’s International Realty. “There’s been a noticeable increase in bidding wars among tenants eager to secure off-market rentals or properties that were previously on the sales market and are now available to rent.”
Speculative Custodianship
A home may lie empty for years in pursuit of a premium selling price. However, keeping the property in viewing-ready condition may prove burdensome and heritage properties, especially furnished turnkey homes, are better occupied. As such, having a tenant in place may provide a favourable alternative.
Moreover, by allowing the owner to sweat the asset, a rent-to-buy set-up creates a passive income stream. Meanwhile, the property is occupied by a potential buyer. Becoming a guardian of the property also instils a sense of ownership in the tenant, which may ultimately lead to a sale.
Prime Opportunities
The rent-to-buy trend can be seen in prime pockets of north London including St John’s Wood and Hampstead. In nearby Highgate, an eight-bedroom property on Sheldon Avenue is available to purchase with a guide price of £13M. The detached property, which benefits from a swimming pool and proximity to Highgate Golf Club, is also available to rent for £25K per week on a short-term basis.
“In North London, we’re seeing sellers who have completed sales now opting to rent,” Francesca explains. “This allows them to ‘try before they buy’, explore new areas, or monitor the sales market. Traditionally, our UHNW and HNW tenants were international, relocating for work with clear exit plans. However, with more tenants considering purchases in the near future, we have opportunities to position them as future buyers.”
Regal Rentals
Presiding over the eastern edge of Regent’s Park, Chester Place is a Grade I-listed terrace designed by renowned architect John Nash. Set within the hum of the city, quiet elegance plays out across this rarefied road of refined residences. A four-bedroom property here is available to buy with a guide price of £4.75M. However, it is also on the rental market for £3,750 per week.
On the other side of the park, a quartet of soaring Roman Doric columns defines the façade of a property with a guide price of £18.95M. Crowned with a vast frieze and an intricately decorated pediment, it is one of two “wing buildings” that bookend Hanover Terrace.
This exceptional six-bedroom house is also on the rental market for £15K per week. Again, the road enjoys a certain stillness despite its relatively central location.
Also part of a Grade I-listed John Nash terrace, its iconic Palladian architecture has come to define the Regent’s Park neighbourhood. This goes some way to show the calibre of homes available under a flexible arrangement.
“Clients with unique trophy homes or long-term holdings, especially those with strong ties to London through generational wealth or business interests, are increasingly open to renting,” Francesca posits. “We anticipate more super-prime houses and apartments becoming available in northwest London in the coming months.”
Mutual Beneficence
Rent-to-buy arrangements come with several pull factors for both sellers and prospective buyers. Where previously, homeowners looking to sell might have been reluctant to become landlords, there is now precedent for such set-ups. Furthermore, there are many benefits. They may wish to give the property a rest from marketing but monetise it in the meantime. With some tenants willing to pay two years’ rent up front, this could constitute a down payment on another property. With a rental at this level, it is likely that a Common Law contract is opted for to afford greater security to the landlord.
“As a result of this trend, landlords of super-prime houses are now more open to creative strategies, particularly if their properties have been on the sales market for over a year,” states Francesca Fox of United Kingdom Sotheby’s International Realty. “This contrasts against the past two years when they were hesitant to commit to long-term leases.”
For prospective buyers, rent-to-buy is less about affordability and more about future planning. These tenants could be entrepreneurs or restructuring overseas. Business disposal, planning permission and liquidity may all play a role. As highly discerning buyers, being able to live in the property before making a nine-figure commitment is also a primary factor.
Rent-to-buy is an interim arrangement that may provide a route to a sale. Within a landscape of caution and hesitancy, creative thinking and alternative solutions are helping to keep the prime and super-prime property markets not just resilient but buoyant.
United Kingdom Sotheby’s International Realty has exclusive access to a curated collection of outstanding homes. To enquire about letting your property or finding your ideal home for rent, contact Francesca Fox (or call +44 204 586 7135). For assistance with buying or selling a property, contact Claire Reynolds (or call +44 204 586 7135).
