Landlords sit tight

28 September 2007 By Ian Campbell

Buytolet investors have enjoyed fabulous returns in recent years. But as rates rise and house prices wobble the feast is over. Yet the sector s plight does not look desperate. Leverage is low and rising rents should allow most landlords to sit out harder times.

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Research by Birmingham Midshires, the second biggest buytolet lender, shows that the average total return for a buy to let investor was 13.0% over the year to June 2007. In the year to June 2006 the average total return was 11.9%. The price of the average buy to let property increased by 7.3% over the year to June 2007 to an average of £141,776. The average rent increased by 4.5% over the past year to £651 per month in June 2007, compared with £623 per month in June 2006. The rental yield fell marginally to 5.5% in June 2007 from 5.7% in June 2006.

The Association of Residential Letting Agents Review and Index for the third quarter shows that the average loan to value ratio for buy to let investors in the second quarter of 2007 was 59%, marginally less than in the previous quarter. Just over a quarter of all BTL investors have loan to value ratios of between 76% and 90%, and only 1.3% loans to value of more than 90%. ARLA also found that in August 54% of all landlords surveyed expect to make further buytolet investments during the next 12 months.

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