27th September 2005

The ARLA Review & Index of Returns on Residential Investment Q3 2005

A quarter of all Buy to Let landlords entered the market in the last twelve months. However, the average length of time in the rental market for most investors is over five years. Only 1.5% of all these would consider selling if house prices should fall.

Nearly six out of ten investor landlords said that they expect to acquire further property in the coming year.

These figures are revealed in the latest quarterly ARLA Review and Index of the Private Rented Sector published today, 27th September. This research is supported by the ARLA Panel of Mortgage Lenders: Birmingham Midshires, GMAC Residential Funding, NatWest Mortgage Services, Paragon Mortgages and The Mortgage Business.

Residential property investors remain evenly split - 44% each - between those wanting to achieve a combined yield from rental income and capital appreciation and those aiming to create a nest egg for their long term future.

Only one in twelve investors became residential landlords solely for the income stream.

For the last quarter, the annual rate of return, including both capital gain and rental yield, for residential property investments purchased outright averaged 11.21%. For property investment made with the help of a buy to let mortgage, the average annual rate was 22.7%.

Well over half of all buy to let landlords report that they are achieving tenancies that continue for between 10 and 18 months. One in seven report that the average length of tenancy is over two years while one in eight report that the average stay is between six and nine months.

These reported tenancy periods are all irrespective of the initial term agreed.

Despite fears that some of the new regulations for the private rented sector would deter investors, only four percent of the Buy to Let landlords questioned expect to be affected by the mandatory licensing for houses in multiple occupation. This comes into force next month.

Said Adrian Turner, Chief Executive of ARLA, "We have been anxious to ensure that the private rented sector as a whole understands the new regulatory regime. It is clear that the typical buy to let landlord is not unduly worried by HMO regulation, as the competitive benefits of providing their tenants with well maintained good quality property are obvious. This is contrary to some fears expressed when the new licensing regime was first proposed."

Full details of all ARLA research is available on www.arla.co.uk

The ARLA Review & Index of Returns on Residential Investment Q3 2005

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