BTL expectations remain positive

The vast majority (90%) of landlords said that alongside plans to buy more property over the coming twelve months, they would not sell should house prices fall.

However if there were changes in the tax regime for residential property investment, a significant number of investors would then consider selling.

The latest ARLA quarterly Review and Index also showed that if mortgage interest ceased to be an allowable business expense, more than four out of ten said they were uncertain what they would do. 28% said they would certainly sell some property, while ten percent said they would sell out of the Private Rented Sector altogether.

Ian Potter, ARLA operations manager, said: "With the institutions less interested in the Private Rented Sector and private equity companies not filling the gap, the loss of any private individual investors would seriously effect the rental market and severely curtail choice in housing.

"Private Buy to Let investors have refinanced the Private Rented Sector and restored social acceptability to renting.”

The average loan to value (LTV) ratio for BTL investors in the last Quarter was 59%, marginally less than in the previous quarter. The proportion with LTV ratios between 51% and 75% has dropped marginally, with a corresponding rise for those with ratios between 25% and 59%. Just over a quarter of all Buy to let investors have LTV ratios of between 76% and 90%, with only 1.3% with LTV’s of more than 90%.

The Review and Index continues to show that the vast majority of landlords invest for the long term. The average life expectancy of their property investments is 16.5 years, with nearly a quarter expecting to hold their investments for more than 20 years.

Over half of all landlords are investing for long-term capital gain, while the number looking for a combined yield from capital appreciation and rental income dropped from 45% to 40%. Very few, only 2.5%, look to make short term capital gains.

The Review shows annual rates of return, including rents and capital appreciation, for the last quarter across all regions as averaging 11.34% from an outright cash purchase of residential investment property and 22.26% from a geared residential property investment.

These in-depth, independent surveys are supported by the ARLA Group of Mortgage Lenders: Bank of Ireland, Cheltenham & Gloucester, GMAC RFC, Mortgage Express, NatWest and Paragon Mortgages.