Renters in the capital have reported that some landlords are encouraging ‘inverse bidding wars’ to get round new rental rules.

Bidding wars - where landlords and letting agents advertise properties then encourage prospective tenants to competitively bid up the amount they’re willing to pay each month - were banned under the Renters’ Rights Act. However, The London Centric Substack reports that they have responded by enormously increasing the advertised prices for flats.

“The landlord’s initial hope is that a potential tenant is panicked enough to pay over the odds,” it explains. “If not, prospective tenants are encouraged to view a property out of their price range then told to put in a bid below the asking price - creating an inverse blind auction where the objective is to try to work out how low your rival bidders have gone, then bid slightly above that.”

Shocked

One renter. who told a letting agent she was shocked by the massive increases in advertised prices reports, told the Substack: “[The agent] said to me that landlords were putting the rent higher, either expecting a lower offer or just taking a stab in the dark and hoping that people would pay.”

How high the advertised rent went depended on the landlord, with the agent telling her some were “going crazy and putting the rent really high, and some were doing it just a little bit higher than what their current tenants were paying”.

Theory

London Centric tested the theory by ringing up more than a dozen letting agents to inquire about renting. It was repeatedly encouraged to view properties advertised as being well out of its stated price range, while letting agents repeatedly said the landlord would definitely consider offers under the asking price.

The report explains: “A mix of desperation to find a property, inexperience in London’s rental market, and a desire to escape the tedium of flat hunting is proving enough to push renters into paying far more than what a flat is worth.”

Goodlord

Tom Goodman, managing director at Goodlord (left), says the report offers strong early evidence of the ‘gazundering’ chaos it predicted would follow the Renters’ Rights Act's bidding-war ban. “While it’s too early to definitively say how the market will shake out long-term, we are starting to see this on the ground, too," he adds. "As some landlords list above market value, tenants are being either spooked into paying inflated prices, or blindly guessing in underbidding free-for-alls

"Agents are also finding their way in this new reality. The default advice we're hearing is for landlords to list above market value to ensure there's negotiating room. Against this backdrop, we’re seeing an appetite amongst all stakeholders for accurate data on 'achieved rents', as opposed to ‘advertised rents’. This was echoed institutionally by a recent Section 13 tribunal case. It’s the only way for landlords, agents and tenants to get a true sense of market value and start finding their footing in this vortex.”

Propertymark

Nathan Emerson, CEO of Propertymark (right), believes a cooling market may simply mean greater negotiation between landlords and tenants.

However, he adds that there is an important distinction between subsequently accepting a lower offer and deliberately setting an artificially high asking rent to recreate a form of bidding process. “The latter raises legitimate questions around transparency and professional practice, and agents must comply with the Renters’ Rights Act,” says Emerson.

“Agents should be using local market evidence and comparable properties to establish an appropriate asking rent. As the market changes, advertised rents should reflect current conditions rather than assumptions based on the exceptionally competitive market of recent years.”

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