A rush by "unscrupulous" landlords to cash in on the 2012 Olympics will push already spiralling rents even higher as demand for properties grows.
With would-be buyers increasingly finding the bottom rung of the property ladder out of their reach, landlords are preparing to let their properties to people attending the Games for bumper profits. Property experts have warned that existing tenants could be forced out to make way for visitors willing to pay as much as £2,000 a week for an East London flat.
"Unfortunately there are unscrupulous landlords out there and, when there is pressure on the market, it creates opportunity for them," said Samantha Baden, an analyst at housing website findaproperty.com.
Beyond the area around the Olympic site at Stratford, agents in London are already reporting rent increases of around 8 to 10 per cent over the last year. The average rent in the capital is soon expected to reach £1,000 a month, and the average age for a first-time buyer in the capital is 43.
Estate agents say that many people are having to rent as they cannot afford to buy, and that this is forcing prices up. Neil Dawson, a lettings manager at Frank Harris and Company, added that "a lot of people are just staying put, and there aren't many buy-to-lets happening either", further decreasing the number of houses available to those looking to rent.
The expected demand for flats during the Olympics is so great that at least one property listings company has changed its focus towards providing a service for people looking to make a little extra renting out their homes during the Games.
Pure Holiday Homes, which specialises in short-term rentals, has begun an advertising campaign and set up a dedicated section on its website in an effort to tap into this market. Sean Collins, the company's joint CEO, said a lot of his clients are "interested in dipping their toe in the water for something like the Olympics".
He added: "I can also see existing landlords beginning to turn their thoughts towards the Olympics and plan their strategies now, and why shouldn't they? The hotels are putting their prices up by a factor of four or five. We believe that a lot of people will be tempted by the prospect of renting out their homes for a couple of weeks and going on holiday – they can make thousands per week."
Helen Jefferson Lenskyj, a retired professor at the University of Toronto and author of three books on the impact of the Olympics, warned that London will face many of the same social ills that other Western cities have seen. She wrote: "In Vancouver [host of last year's Winter Games], the landlords in low-rent accommodation saw dollar signs. They evicted their tenants and sold the buildings for big profits."
Organisers of the London Olympics have been keen to stress that affordable housing will be a key part of the Games' legacy. During major sporting events, exhibitions and festivals, property owners typically raise rates from anywhere between 50 and 200 per cent, according to the property firm HomeAway Holiday-Rentals. "Based on what we saw in the World Cup in South Africa, we are anticipating people in prime spots in London will be able to raise their rates by 200 to 250 per cent," a spokesman said.
Lucian Cook, head of research at the estate agent Savills, warned that landlords will have to "weigh up the costs of finding a tenant after the Olympics [against] the money they make in the rent rise during it".
Around 3.5 million people are living in rented accommodation across the country, and the housing minister, Grant Shapps, is looking to attract more investment in an effort to increase the supply of housing.
Mr Shapps said he wants to end the "unfavourable stamp duty arrangements for bulk property purchases" and indicated that, with 300,000 long-term empty properties in the country, the Government is investing £100m to "tackle the problem".