• Download the ARLA Review & Index Q2 2007 (1,013k)
• Download the latest quarterly Survey of ARLA Member Letting Agents 127k
• Download the ARLA Survey of Residential Investment Landlords (66k)

2 July 2007

Buy to Let investors are vital to the health of the whole housing market. Without them there would be little or no choice in housing and they should not be misled by suggestions that they are the recipients of favourable tax treatment, ARLA, the professional body for the Private Rented Sector said today on publication of the quarterly ARLA Review & Index .

The latest quarterly results show that 42 % of all investment landlords have one or two properties to let while one in ten have more than ten. Four out of ten Buy to Let investors have mortgage borrowings with a loan to value ratio of between 51 and 75 percent. A further quarter has borrowings that account for less than half of the value of their residential property investments.

Six out of ten of these investors expect to acquire further properties during the next twelve months and the average life expectancy of these investments is over 17 years.

Commented Adrian Turner, Chief Executive of ARLA, "Again, our quarterly figures show that investment landlords are in the business of residential letting for the long term. This is vitally important. Without these investors, who have helped to save the Private Rented Sector by re-financing it, there would be little or no choice in housing. If that had happened, the probability is that house prices would have risen further and the social rented sector would have buckled under the pressure. So, we must ensure that investors are neither misled nor panicked as a result of ill-informed criticism of the sector."

"Also, it should be made perfectly clear that these investments are taxed on profit and capital gains in precisely the same way as any other investment or business," Adrian Turner added.

The ARLA Review shows that the current rate of return on a cash investment in rental property is 11.32%, up 0.14%. On a geared - mortgaged - investment, the returns are 23.25%, up 1.57%. These returns include rental yields and capital appreciation.

To bring the figures into line with the market, the assumptions in this quarter's Review are for a mortgage interest rate based on an average of the two year fixed rates currently available from the ARLA Group of Buy to let Mortgage Lenders. This is instead of an arbitrary 1.75% above base rate that was applied before and reflects the Buy to Let mortgage market trend. The annual rate of rent inflation is assumed to be the same as the Retail Price Index, currently 4.8%.

The ARLA Review & Index takes its information each quarter from an average of nearly 500 letting offices and over 250 investment landlords. It is by far the largest survey of the Private Rented Sector and is supported by the ARLA Group of Mortgage Lenders: Bank of Ireland, Cheltenham & Gloucester, GMAC-RFC, Mortgage Express, NatWest, and Paragon Mortgages.

Again this quarter, the Review shows that the average time tenants remain in a property is longer at 18.2 months, against 18 months in the previous quarter. This continues the upward trend of the past two years.

Asked what properties investment landlords favour, less than 20% report buying new build. The majority, 45%, have bought property that is already in good condition, 18% bought property needing refurbishment. However, property that is actually in a poor condition is the least likely to be purchased.

Said Adrian Turner, "Private individuals who invest in the Private Rented Sector are cautious and make good landlords. This is precisely the type of individual that ARLA hoped to attract when it launched Buy to Let, the post housing crash rescue operation for the whole sector over a decade ago. We must continue to encourage private investment in the rental market or risk seeing increasingly serious problems in the general availability of housing."

• Download the ARLA Review & Index Q2 2007 (1,013k)
• Download the latest quarterly Survey of ARLA Member Letting Agents 127k
• Download the ARLA Survey of Residential Investment Landlords (66k)

More research & archived survey results on the UK Buy To Let sector can be found in the Buy to Let Section of this site.

 

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