Buy-to-let property remains robust

Monday, 7 January 2008 12:00 AM

Sentiment in the buy-to-let sector remains buoyant despite growing concerns for the wider property market.

That is according to the latest research from the Association of Residential Letting Agents (ARLA), which finds 90 per cent of landlords have no desire to sell property during the next two decades.

Furthermore, up to 40 per cent of landlords are seeking to buy further properties during 2008.

"This is good news for the whole of the private rented sector and for the housing market, particularly as it comes from surveys carried out well after the credit crunch had begun to bite," commented ARLA's head of operations, Ian Potter.

"The rental sector is the lynchpin for all our housing requirements and needs continual investment from private individuals as it still suffers from a lack of investment from the institutions."

According to ARLA buy-to-let landlords borrowed an average of 70 per cent of the value of a property when setting up a new investment during the final quarter of 2007, down from 74 per cent in the previous quarter.

Landlords also expected these investments to remain for an average of 16.7 years.

Furthermore, only one in 12 landlords expects their investment to last less than five years and a mere two per cent see it as short term, i.e. less than two years.

Some 7.5 per cent of landlords also bought off-plan property during the final three months of 2007, a worrying trend according to ARLA.

"The rental market is too fluid to make judgements on rental values and likely demand months or even years in advance, for property that has yet to be built," continued Mr Potter.

"We cannot repeat this warning often enough. The potential investor must take local advice from the professionals about the property, the way it is furnished and the realistic market rent."

Finally, the research shows the average rate of return on a cash purchase of residential investment property is 10.8 per cent.

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