ARLA forecast April 2008

Buy to Let investors have seen increases in their returns during the first quarter of 2008, according to the quarterly ARLA Review and Index published today, March 31.

The average return on a geared (mortgaged) investment is 21.7%, up 0.27%, and returns on cash purchases average 10.91%. Flats show a marginally higher return than houses, except in the North. All returns on rental investments include capital appreciation and rents.

This quarter, the number of Buy to Let investors reporting a significant impact on the rental market due to immigration has increased by nearly 10% since the question was last asked at the end of 2006.

Unsurprisingly, given this increase in immigrant demand and the domestic demographic trends, nine out of ten investment landlords continue to state that they have no intention of selling their investment properties should house prices fall. This majority proportion is virtually unchanged on the last quarter.

About half, 46%, of all investment landlords report their intention to buy further property during the next twelve months and the average life expectancy of their investments remains unchanged, at close on 17 years.

However, irrespective of house prices, 18% of landlords will sell some or all of their property investments during the coming year. Retirement has more than doubled as a reason this quarter, while others cited the purchase of other properties and realising gains.

The quarterly ARLA Review and Index, the largest survey of its kind, is carried out with the support of the ARLA Group of Buy to Let Mortgage Lenders: Bank of Ireland Mortgages, Cheltenham & Gloucester, GMAC-RFC, Mortgage Express, NatWest and Paragon Mortgages.

The surveys providing the information for the Review and Index were carried out during February and March among 288 investors and 439 letting agents.

Across their portfolios, landlords report an average Loan to Value ratio of 57%. The proportion with Loans to Value of more than 75% has dropped considerably over the last two quarters, falling from nearly 30% in the autumn of last year to 23.9% in March.

Commented ARLA Operations Manager Ian Potter, "There can be no doubt from these figures that Buy to Let landlords are well aware of the opportunities but behave with caution. In fact, caution has been the watchword in the Buy to Let market since its inception. Buy to Let remains the sustainable option for housing."

The average portfolio contains just under seven properties, although half of all respondents only hold one or two properties. The most likely Buy to Let purchase is a property between 50 and 100 years old in good condition. The least likely purchase is of properties that have never been occupied or bought off plan.


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