29th March 2006
Download ARLA Review and Index Q1 2006 714k
The U-turn by the Chancellor that blocked residential property investments being held as an asset class in a SIPP has had no discernable impact on the Buy to Let market. This is shown in the latest quarterly Review and Index from the ARLA Panel of Mortgage lenders.
Carried out during February, it shows that current investment landlords expect to buy further investment properties in the next twelve months and they expect to hold their properties for an average of 17 years.
Speculation in rental property is shown to be virtually non-existent with a mere 1.1% of investment landlords expecting to hold properties for less than two years. Only just over 5% believe they will only hold their investments for less than five years.
Said ARLA Chief Executive Adrian Turner, releasing the latest Review & Index, "For all the hype and the special deals and curiously expensive symposia, buy to let investors prove themselves yet again to be serious, long-term investment landlords. They are driving the long term financing of the private rented sector. It is precisely what is needed both for the sector and for housing in general."
The ARLA Index, which allows comparison between buy to let and indices for other forms of investment was up slightly for both cash purchase and geared investment purchases at 101.1 and 98.7 respectively.
Quarterly changes in the average rates of return for either type of buy to let investment are virtually unchanged at 0.06% and 0.15%. The annual rates of return across all regions calculated over a five year span is 11.29% for a cash purchase and 22.89% for a geared investment.
Commented Adrian Turner, "It is clear that overall, the average rates of return which had declined during 2003 and 2004 then turned upward at the end of 2004 and have continued to rise, despite a single quarter downturn at the beginning of last year.
The Review shows that seven out of ten buy to let investors have come into the private rented sector since the Millennium. Four out of ten have become investment landlords since the beginning of 2003. Nearly half of all respondents said they held properties in the South East, a quarter of them in London.
Southern landlords are also continuing to invest in the north. 54% of all the respondents hold properties between the Midlands and Scotland. However, only 35% of them live there.
The quarterly ARLA Review and Index and the members surveys are supported by Birmingham Midshires, GMAC Residential Funding, NatWest Mortgage Services, Paragon Mortgages and The Mortgage Business. This quarter shows that the average length of time that tenants stay in rental properties is 17.5 months. This is regardless of the initial term agreed.
This reported length of tenancy is up slightly from the previous quarter and it is the longest reported since the question was first asked a year ago.
Asked more general questions, investors in the private rented sector are shown to remain insufficiently aware of the government timetable to introduce mandatory tenancy deposit schemes later this year.
Only a quarter claim to know the details, although getting on for half have heard of the plans but know no detail. Three out of ten landlords say they are unaware that tenancy deposit schemes are to be introduced.
The ARLA Review & Index, along with the quarterly surveys of landlords and letting agents is available on www.arla.co.uk
Download ARLA Review and Index Q1 2006 714k
