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BTL investors in it for the long haul

Buy-to-let investors expect to keep their properties for an average of 17 years, the quarterly review by the Association of Residential Letting Agents reveals.

ARLA says the results suggest the buy-to-let sector is dominated by long-term, mature investors.

Buy-to-let investors borrow an average of 73% of the purchase price for their property investments.

Over 40% of these investors buy properties that are over 50 years old and less than a fifth buy new-build.

Publication of the review is supported by the ARLA Group of buy-to-let mortgage lenders, Bank of Ireland, Cheltenham & Gloucester, GMAC-RFC, Mortgage Express, NatWest, and Paragon Mortgages.

The group represents well over 50% of the buy-to-let mortgage market and it covers the different strands that make up the sector, from newcomer to small portfolio holders to professional investment landlords.

Across the board, investment landlords report that tenants stay in their properties for an average of 18 months. This is irrespective of the length of the initial term agreed. And 40% say that tenants stay for more than 18 months.

A further fifth reported their tenants as staying for more than two years and only a third reported stays of less than a year.

Nearly a third of these tenants are aged between 23 and 30, a quarter is between 31 and 40 and nearly another third are over 40. One in eight is under 23.

Adrian Turner, chief executive of ARLA, says: “Increasingly, renting is seen as a long-term option across all age groups. We believe that this is a reflection of a competitive rental market, increasingly high standards of housing that meet aspirations and a desire for flexibility.”

The ARLA index shows that the annual rates of return for a cash purchase of residential rental property average 11.18%. For geared investments the average is 21.68%. These returns include both rental income and capital appreciation.

There is only a marginal difference reported in the returns from flats and houses.

The review shows that the proportion of landlords with houses in multiple occupation continues to fall. In the last quarter, the number of landlords reporting they had HMOs fell from 54% to 49%.

Those leaving the HMO market cite bureaucracy, costs of alterations and licence fees as the prime reasons for their departure.

Even if house prices were to fall, the great majority, 86%, of all
investment landlords say they will not sell. Instead, nearly six out of 10 respondents expect to buy more residential investment property over the next 12 months.

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