October 2008

Buy to let landlords stay calm amid financial storms

INVESTMENT landlords in the private rented sector continue to remain calm in the face of the current financial storms, according to a new survey.

Over three quarters of those questioned for the third quarter ARLA Review and Index, will not sell their investments because of falling house prices.

Instead, they expect to keep their property portfolios for an average of over 16 years. A further quarter intend to hold their investments for more than 20 years.

The Third Quarter Review by the Association of Residential Letting Agents shows that the average rate of return over five years on residential rental property bought outright averages 10.92 per cent.

Four out of ten of those surveyed expect to buy property over the next 12 months.

Ian Potter, ARLA’s head of operations, said: “These figures show that investors are still intending to make use of the availability of buy to let mortgages and that the profile of the typical buy to let investor has not changed since ARLA first launched Buy to Let following the last serious downturn.

“The average investor is cautious, mature and aims to support the private rented sector for the long term by looking for the right property in the right market.Before the credit crunch, ARLA was forecasting sustained growth in the rental market, driven by a variety of domestic demographic factors.

“It is very clear that without the support of the buy to let investor, the sector would be seeing some very serious shortfalls in the supply of housing to rent in some areas given the downturn in the housing market.”

However, letting agents report they are seeing an increase in rental property coming onto the market because it cannot be sold. Overall, this has been mainly houses rather than flats, except in London where the reverse is true.