Landlords not selling up says ARLA

Over three quarters of those questioned for the third quarter Association of Residential Lettings Agents Review and Index say they 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 shows that the average rate of return over five years on residential rental property bought outright averages 10.92%.

For a geared investment with a LTV ratio of 75%, the average return is 21.07%.

Portfolio landlords carry an across-the-board LTV ratio of only 57.3%. When making new acquisitions, they expect their LTV to be about 70%. Four out of ten of those surveyed expect to buy property over the next twelve months.

Ian Potter, head of operations at ARLA, says: “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.”

According to the latest surveys that form the basis for the Review and Index, migrants from the new European Union countries continue to make an impact on the rental market.

Potter says: “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.”

But 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.

The Third Quarter Review and Index is based on the responses from 453 letting offices and 494 investment landlords during August and September.