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Buy-to-let confidence booms
Sarah Modlock
21 February 2006
If you are uncertain about whether to invest in property via buy-to-let then there is good news. A new survey from Bradford & Bingley - the UK 's largest buy-to-let lender - reveals a high level of confidence amongst landlords. The bank asked the opinion of over 3,000 customers of its specialist lending arm - Mortgage Express making this the most comprehensive survey of its kind.
Nearly four out of five investors feel either the same, or more positive about investing than they did last year with 91% of landlords claiming that in 2005 rent levels either stayed the same, or increased.
In the first quarter of 2006 almost all landlords expect demand for rental property to either stay the same, or increase. Confidence in the market is so strong that 86% of landlords are planning to either maintain, or increase their property portfolio this year. Only 1% are looking to leave the market.
Most investors are earning a good income from their property portfolios with 49% earning over £15,000 per year. More than half say they are investing in buy-to-let primarily to provide for their pension.
So what sort of property remains popular? Terraced properties are the number one choice for investors with more than half having one in their property portfolio. Two-bedroom flats are the second most popular choice with almost half of landlords owning one.
Perhaps unsurprisingly, the South East remains the most popular area with just over half of rented properties situated there. This trend looks set to continue with a third of those planning to increase their portfolio looking for properties in the South East.
'This comprehensive study demonstrates the high level of confidence in the buy-to-let market at the start of 2006 with over half the landlords surveyed viewing investment in bricks and mortar as a good way of preparing for their retirement,' says Andrew Moss, the buy-to-let manager at Mortgage Express. He expects demand for rental properties is set to rise by 3% per year over the next ten years due to social and demographic trends. 'More young people see renting as a lifestyle choice whilst they search and save for their first property. In addition there is an increasing number of students who will be looking to rent,' adds Moss.
Positive glow
The positive glow over buy-to-let is supported by figures from ARLA (the Association of Residential Letting Agents). Its stats for the last quarter of 2005 show that nearly two thirds of the investor landlords questioned said that they expect to enlarge the size of their portfolios during 2006 - the second consecutive quarter to show this upward trend.
The ARLA research shows that while most buy-to-let landlords invest in residential property for the long term, only 5% invest solely for the rental income. Instead, more than half of all investor landlords are looking to create a nest egg for themselves some 15 years ahead. The remainder look for a mixture of income and capital gain.
'It is notable that the upward trend began well before last month when the Chancellor killed off residential investment using self invested pension plans,' says ARLA chief Adrian Turner. 'It shows that buy-to-let remains highly regarded as a stand alone investment,' he says.
The survey shows that it is becoming more common for landlords to own properties away from the areas where they live. Nine out of 10 of landlords questioned said they would not sell their investment properties should house prices fall. On average, they expect to hold their properties for over fifteen years and report that tenants are staying in rental property for an average of 16.8 months.
'This utterly refutes reports that the structure of the private rented sector makes for short tenancies,' says Adrian Turner. 'It is obvious that through buy-to-let, tenants are staying for a comfortable period. It is an example of how professional agents and buy-to-let landlords have transformed renting to such a degree that it has become socially acceptable and the first choice of many.'
To find out more about buy-to-let, visit www.bradford-bingley.co.uk.
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