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New ARLA History of Buy to Let figures released

publication date: Aug 16, 2007
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A very useful research document for ARLA members to pass on to their investment landlords

The ARLA History of Buy to Let Investment 2001/2007 has been published by the ARLA. It is hoped that these figures will halt much of the confusion surrounding the growth of Buy to Let, the investment concept that revived the Private Rented Sector and increased the options for the nation’s financial planning.

The publication is a compendium of all the statistics gathered by the Association from its member letting agents and investment landlords since the first quarter of 2001 up until the first quarter of 2007. The data has been drawn every quarter from an average of around 500 letting agents and over 250 investment landlords.

ARLA believes that these quarterly surveys represent the largest single source of information about the Buy to Let market and are particularly significant because the data is provided by landlords and agents who are involved in residential property investment on a day to day basis.

Said Adrian Turner, ARLA Chief Executive, “Although ARLA launched the whole concept of Buy to Let, with the backing of the ARLA Group of Buy to Let Mortgage Lenders, in the autumn of 1996, it was after the Millennium that Buy to Let began to play a really significant role in refinancing the Private Rented Sector and providing more choice in good quality housing. It was then that ARLA was in a position to start acquiring data that provides us with a compendium showing the growth of Buy to Let.”

The data compiled from letting agents includes rental returns, the balance of supply and demand and achieved rent levels. From investment landlords, the information includes the life expectancy of individual property investments, expectations of acquisitions and sales of Buy to Let property and the reasons for entering the market. Commented Adrian Turner, “We would not have been able to produce this information so consistently without the wholehearted co-operation of a great many ARLA member letting offices and our email subscribers. ARLA and the Private Rented Sector owe them a vote of thanks.”

The ARLA History of Buy to Let Investment 2001/ 2007 has been produced in association with the ARLA Group of Mortgage Lenders: Bank of Ireland, Cheltenham & Gloucester, GMAC- RFC, Mortgage Express, NatWest and Paragon Mortgages. It can be downloaded from www.arla.co.uk.

The history of Buy to Let has been well received Rosie Millard, writing in The Sunday Times said:

 “My book at bedtime this week has been a history of buy-to-let. The Association of Rental Lettings Agents (ARLA), which invented the concept, has published an archive of statistics, garnered during the past seven years from 500 of its 1,800 members and over 250 landlords.

About a quarter of the respondents came from prime central London, half from the southeast and the remainder from the rest of the UK. The resulting information has all been crunched into a number of tables to form an eight-page handbook.

And, without wishing to sound like a total property bore, it makes an interesting read. One table, for example, reveals that, during the past five years, you would have been better off with a buy-to-let flat (average annual yield of 5.1%-5.6%) than a house (4.9%-5.4%). Another table reveals that the average age of a landlord is 461⁄2. And the following one reveals that the average landlord has been doing it for 61⁄2 years.

Contrary to expectations, tenants in London are inclined to stay where they are for almost three months longer than their regional counterparts. Also, at the moment, more landlords are buying (30%) than selling (15%), thus torpedoing the prevailing notion that they are flogging everything in a panic.”

Don’t mislead The Buy to Let sector – ARLA warns

Buy to Let investors are vital to the health of the whole housing market. Without them there would be little or no choice in housing and they should not be misled by suggestions that they are the recipients of favourable tax treatment, ARLA, the professional body for the Private Rented Sector said on publication of the quarterly ARLA Review & Index.

The latest quarterly results show that 42 % of all investment landlords have one or two properties to let while one in ten have more than ten. Four out of ten Buy to Let investors have mortgage borrowings with a loan to value ratio of between 51 and 75 percent. A further quarter has borrowings that account for less than half of the value of their residential property investments.

Six out of ten of these investors expect to acquire further properties during the next twelve months and the average life expectancy of these investments is over 17 years.

Commented Adrian Turner, Chief Executive of ARLA, “Again, our quarterly figures show that investment landlords are in the business of residential letting for the long term. This is vitally important. Without these investors, who have helped to save the Private Rented Sector by re-financing it, there would be little or no choice in housing. If that had happened, the probability is that house prices would have risen further and the social rented sector would have buckled under the pressure. So, we must ensure that investors are neither misled nor panicked as a result of ill-informed criticism of the sector.”

“Also, it should be made perfectly clear that these investments are taxed on profit and capital gains in precisely the same way as any other investment or business.” Adrian Turner added.

The ARLA Review shows that the current rate of return on a cash investment in rental property is 11.32%, up 0.14%. On a geared – mortgaged – investment, the returns are 23.25%, up 1.57%. These returns include rental yields and capital appreciation.

To bring the figures into line with the market, the assumptions in this quarter’s Review are for a mortgage interest rate based on an average of the two year fixed rates currently available from the ARLA Group of Buy to let Mortgage Lenders. This is instead of an arbitrary 1.75% above base rate that was applied before and reflects the Buy to Let mortgage market trend. The annual rate of rent inflation is assumed to be the same as the Retail Price Index, currently 4.8%.

The ARLA Review & Index takes its information each quarter from an average of nearly 500 letting offices and over 250 investment landlords. It is by far the largest survey of the Private Rented Sector and is supported by the ARLA Group of Mortgage Lenders: Bank of Ireland, Cheltenham & Gloucester, GMAC-RFC, Mortgage Express, NatWest, and Paragon Mortgages.

Again this quarter, the Review shows that the average time tenants remain in a property is longer at 18.2 months, against 18 months in the previous quarter. This continues the upward trend of the past two years.

Asked what properties investment landlords favour, less than 20% report buying new build. The majority, 45%, have bought property that is already in good condition, 18% bought property needing refurbishment. However, property that is actually in a poor condition is the least likely to be purchased.

Said Adrian Turner, “Private individuals who invest in the Private Rented Sector are cautious and make good landlords. This is precisely the type of individual that ARLA hoped to attract when it launched Buy to Let, the post housing crash rescue operation for the whole sector over a decade ago. We must continue to encourage private investment in the rental market or risk seeing increasingly serious problems in the general availability of housing.”

The Review and Index and the Landlord and ARLA member surveys can be downloaded from www.arla.co.uk



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