Private Rental Sector Is Flourishing

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The confidence of landlords does not seem to have been completely crushed by the recent global credit crunch, according to a press release by the Association of Residential Letting Agents (ARLA). The ARLA is the professional body concerned with the self-regulation of letting agents. Members are seen as being at the forefront of the private rental sector

Figures from their findings show 71 per cent of landlords had no intention of selling their property. Ten per cent of members reported that they were currently buying more properties. This confidence is supported by the Council of Mortgage Lenders (CML), which in a report found that 0.04 per cent of mortgaged buy-to-let properties, were taken into possession during the fourth quarter of 2007.

In another survey by Mortgage Express, less than 45 per cent of landlords reported not being concerned with the down turn in the housing market, because they are in it for the long-term. Capital appreciation was their primary motivation. This contrast with fifteen per cent whom had become anxious, but had no plans to sell. One per cent of landlords however said they were ‘throwing in the towel’ and planning to leave the market.

Research by Mortgage Express revealed the traditional terrace house is still the most popular type of property owned, with 59 per cent of landlords having them in their portfolio. Flats are next favourites, with 47 per cent of landlords having two bed flats in their residential investment portfolio. Detached and Maisonette property accounted for 13 per cent and 11 per cent respectively, with the Bungalow representing the smallest investment at 7 per cent.

The ARLA survey shows falling asset prices is resulting in higher yields as well as increasing rents. Average returns for rented houses have increased from 4.8 per cent to 5 per cent. Flats have risen from 4.9 per cent to 5 per cent. Increased demand isbeing driven in part by immigration. Across the country, the average proportion of properties taken by immigrants through ARLA members is 20 per cent. More than 16 per cent of these tenants are from the European Union. In Central London the proportion of immigrants renting is 28 per cent. In the south-east of England the figure is 21 per cent and in the rest of the country is 15 per cent.

Continual uncertainty of the global credit crunch, affecting the banking and lending institutions, as impacted on consumer confidence. The rental sector is also flourishing, partly due to the slow down in the housing sales market. Those who might otherwise be buyers have or are contemplating renting instead. House prices have began to fall along with interest rates, thus encouraging prospective home buyers to adopt ‘a wait and see’ policy before venturing back into the housing market.

Head of ARLA operations, Ian Potter said, “This quarter’s report emphasises the traditional cycle of the housing market. We are seeing the beginning of the inevitable. Whenever property prices soften or fall, rental demand rents and yields all increase. As we begin a year of uncertainty in the sales market, it is inevitable that our member letting agents report that they have more tenants than properties available for them.”

Looking to the future Ian Potter said, “The supply of property in the private rental sector must riseif we are to provide for immigration as well as all the other sectors of our society, who want to rent. These findings show that we urgently need to find better cross-border referencing systems if we are to satisfy landlords, that they are letting to good covenant tenants.”

The number of buy-to-let loans increased by 23 per cent last year accounting, for 10.3 per cent of all mortgages. Tenants seeking rental accommodation will continue to grow as demand outstrips supply and the rental sector is predicted to remain strong throughout 2008.

Editor: Simon



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