Print

Buy to let market stable outside London

The national average gross rental return on a buy-to-let property declined only marginally, from 6.3% to 6.1%, during the three months to the end of November but the number of new tenancies was up.

Outside London and the South East, achievable rents have increased over the past two quarters now, while the balance of supply and demand is broadly unchanged.

These figures are revealed in the latest quarterly survey of letting agents from the Association of Residential Letting Agents, ARLA. Backed by the ARLA Panel of Mortgage Lenders: Birmingham Midshires, GMAC Residential Funding, NatWest Mortgage Services, Paragon Mortgages and Standard Life Bank, this is the largest survey of its kind for the buy-to-let market. It takes as its base well over 500 letting offices from around the country.

According to these ARLA member lettings offices, a rental return of between 4% and 7% is usual for buy-to-let properties. This applies to all areas but there are marked differences. In prime Central London the average rate of return is 5.4%. In the South East it is 6.0% and in the rest of the country it rises to 6.8%.

Away from London and the South East, the outlook for rent levels is optimistic. Half of all the letting offices said that rents have increased over the last three months. This compares to a third reporting a drop. Prime Central London continues to see rental levels fall. However, in the rest of the South East, the decrease is less marked.
New tenancies are up by 4% on the last quarter.

Prime Central London showed signs of renewed activity with the number of new tenancies reported up by 6%. The rest of the South East fell slightly by 2% but the rest of the country has increased by 11%, against the three months to the end of August.

The balance of supply and demand is virtually unchanged since the previous quarter. In prime Central London, three quarters of all letting offices report that there are more properties than potential tenants. In the rest of the South East, this falls to just over two thirds (68.2%). In the rest of the country, the figure fell to less than half (46.8%). Averaged across all regions, two thirds of all lettings offices reported over supply for the last three months.

Most lettings offices report that more than 25% of their portfolios are made up of investment property. Four out of ten (44%) report that half of their portfolios are investment property. In prime Central London, the average percentage of investment property in letting agents' portfolios is 52%. This compares to 44% for all the rest of the country.

Nationally, the average void period has remained unchanged at 30 days. In prime Central London rental properties are empty for an average of 35 days. In the South East, the average is 29 days and for everywhere else the average is 28 days.

Said John Crossley, Chairman of ARLA, "Set in the context of more than two million households in the private rented sector as a whole, our latest figures show a relatively stable market with encouraging signs of new rental activity. This applies to prime Central London, as well as other parts of the country. The London market has been badly effected by outside events that have led to the sharp drop in tenants from the city."