Buy-to-let investors increasing their portfolios

The average size of Buy to Let portfolios has risen from 4.9 to 5.7 properties since the previous quarter. This continues the steady increase over the past year, from an average of 4.1 properties in June 2004.

Underlining the stability of the rental market, 97% of all respondents report that, although the majority of tenancies agreed are for an average initial period of just over nine months, most tenants stay on for an average total of seventeen months.

The majority of tenancies (82%) are arranged as Assured Shorthold Tenancies. Only one in thirteen tenancies are arranged outside the Housing Act, most often because the rental levels exceed ?25,000 a year. Other forms of tenancy reported include short term lets, holiday lets and contracts with Housing Associations and other regulated social landlords.

Residential landlords are split fairly evenly between those who look for both a rental income and capital appreciation (47%) and those investing solely to create a nest egg for their future, to be realised nearly 20 years down the line (44%).

This near 50/50 split has changed only marginally since the last quarter, while only one in fifteen landlords have invested solely for the rental income.

The average buy to let investor expects to hold properties for 17 years.

The ARLA Review and Index is a quarterly tracking survey. It is supported by the leading buy to let mortgage lenders from the ARLA lenders panel, Birmingham Midshires, GMAC Residential Funding, NatWest Mortgage Services, Paragon Mortgages and The Mortgage Business.

It shows that the average experience of Buy to Let investors is 5.3 years as a landlord. Over 70% have more than two years' experience of residential investment. On average, the length of investment experience is now over five years.

Two thirds of these investors have portfolios of two or more properties and over half have three or more. One in five have established portfolios of six properties or more. This raises the average size of portfolios to 5.7 this summer.

The ARLA Index, at 101 for a cash purchase and 97.2 for fixed investments, shows a steady rise since last autumn. This suggests an equally steady improvement in rental yields. The Index, created in the first quarter of 2002, is base 100.

Commented Adrian Turner, Chief Executive of ARLA, "One of the significant advantages of Buy to Let to the private rented sector is the long term approach of the 21st century landlord. From the beginning we knew that the concept of buy to let attracted the financially mature investor. Once again this is being illustrated by the clear understanding shown of the long term, contra-cyclical nature of residential property investment. This allows the rental market to act as a safety valve for the whole housing sector."

Getting on for half of all investors responding to the survey, 46%, live in London and the South East, with almost a fifth, 19%, coming from London itself. The Midlands and the South West produced the next highest proportions of respondents at 13% each, followed by the North East with 9% and the North West with 7.3%.

The Quarter 2 ARLA Review and Index is based on responses from 489 regulated agents and 322 investment landlords. This represents an average response level and makes the ARLA surveys the most representative examination of the private rented sector and the Buy to Let market. All surveys and The Review and Index can be downloaded from