Investment landlords exploit low house pricesBuy-to-let landlords boost their portfolios

20 June 2009

Buy to let landlords exploit low property prices says ARLA

Buy to let landlords are taking advantage of house price falls and record low interest rates to increase their property portfolios, research has showed.

Around 16% of letting agents said buy-to-let landlords increased the number of properties they bought during the second quarter of the year, up from only 8% during the first three months.

The Association of Residential Letting Agents (ARLA) said the move was being driven by the dramatic falls in the Bank of England base rate seen between October and March.

Half of letting agents said they thought landlords were returning to bricks and mortar because of the minimal returns available on savings accounts.

At the same time, house price falls have made properties cheaper to buy, boosting their rental yields, while lower interest rates are reducing mortgage repayments, although there is still a shortage of buy-to-let loans.

ARLA: landlords motivated by base-rate falls

Cheaper property prices have boosted the average yields landlords can make on houses to 5.1%, up from 4.8% during the first three months of the year, while average annual rents are now the equivalent of 5% of a flat's value, up from 4.9%.

But the rise in yields masks a continuing fall in average rents, as supply in the private rental sector continues to outstrip demand due to a glut of so-called accidental landlords who are renting out their homes because they have been unable to sell them during the housing market downturn.

Confidence in buy to let market being restored

The average monthly rent on a house fell to £1,570 during the second quarter, down from £1,682 during the previous three months, while the average rent on a flat is now £987, down from £1,013 during the first three months of the year.

Ian Potter, operations manager of ARLA, said: 'Each quarter we glimpse a bit more activity as the bargains get snapped up and confidence is restored in buy-to-let as a viable long-term investment vehicle, particularly if the returns are rising too.'

The research was based on the responses of 730 letting agents.

© Press Association 2009

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