Nine out of ten landlords have no intention of selling

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by Gill Montia

A recent survey by the Association of Residential Letting Agents (ARLA) indicates that nine out of 10 landlords have no intention of selling their properties in the near future.

In its Review and Index of the fourth-quarter of 2007, ARAL found that on average, landlords expect to keep their properties for a further 17 years and four out of 10 expect to make further investments in the private rented sector during 2008.

According to Ian Potter, ARLA’s Head of Operations: “This is good news for the whole of the private rented sector and for the housing market, particularly as it comes from surveys carried out well after the credit crunch had begun to bite.”

Other data from the index show that in the three months to the end of December, buy-to-let investors borrowed an average of 70% of the purchase price of a property, as compared with 74% in the previous quarter.

The average life expectancy of a buy-to-let investment was 16.7 years, a figure that has remained fairly constant over the past three years.

One in 12 landlords expected their investment to be less than five years and only two per cent were looking for a short-term return (less than two years).

The survey gave an average rate of return on a cash purchase of residential investment property of 10.8%.

The research was undertaken too early to judge any possible effects of the proposed changes in Capital Gains Tax this April but it did highlight the likelihood of any alteration in the current level of tax relief seriously damaging the private rented sector.

Twenty-five per cent of respondents said they would sell all or some of their property investments should tax relief on mortgage interest (offsetting interest payments on a mortgage against tax on rental income) be disallowed, along with other expenses such as agents’ fees and maintenance costs.

The Review and Index is compiled from information provided by investor landlords who subscribe to the ARLA Buy to Let website, plus its member letting agents.