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krustie allslop

Arla: Buy-to-let Holds Up But Rental Yields Static

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Rental yields are static and there are still more properties on the market than there are tenants looking for accommodation

The latest survey of members of the Association of Residential Letting Agents (ARLA) shows that the return on residential property investment has stayed static at 4.9% for houses and 5.1% for flats.

The proportion of ARLA agents saying that there are more properties than tenants has fallen from a high of 66% three years ago to just 45% for this quarter, but is still significant, indicating that it is still a tenants’ market – hence the static rental yields.

However according to the ARLA survey yields of 4.9% to 5.1% appears to be satisfactory for buy-to-let investors, ‘as a mood swing has become apparent with significantly more investment landlords buying rather than reducing their property holdings,’ says the report.

Average weekly rents for houses in prime central London are now £655 and for flats £406. In the rest of London, the rent for a house averages £266 and £261 for a flat. This compares with a rental of £175 a week for a house in the Midlands and £112 for a flat

Outside London and the Home Counties, the northwest of England achieves the highest rents, with £200 a week for a house and £157 for a flat. In Scotland, the average rent for a house is £168 a week and £129 for a flat.

‘This is continuing evidence that the private rented sector continues to be an attractive proposition for investor landlords and that it is the most stable sector of the housing market,’ commented Adrian Turner, chief executive of ARLA.

‘This is underpinned by the fact that renting is socially acceptable for many for a variety of different reasons making it likely that industry forecasts of growth in renting from 11% to 15% of all housing are likely to prove accurate.’

More than three quarters of ARLA's member letting agents believe that landlords are still marking time over increasing their net investment in residential property, although the last quarter has shown an increase in agents who believe that investors are on the move again.

Compared with the previous quarter, there has been an upturn from 10% to 15% of agents who believe that investors are buying more and there is also a corresponding fall in the numbers who say that landlords are selling, down from 12% to 7%. The net position has moved from 11% of landlords selling to 8% buying.

This latest quarterly survey shows that ARLA member letting agents let some 310,000 properties under full management. The rental market in prime central London makes the least use of full management services.

Full management services are used for an average of 121 properties per agent’s office in prime central London compared with an average of 198 fully managed properties for each office in the south east and 268 for letting offices in the rest of the country.

Tenants stay for an average of 15 and a half months in prime central London but for a month less in the rest of the South East. They stay for just 13.6 months in the rest of the UK. The average void period between lets throughout the country remains static at less than a month.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
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