Arla Survey: Btl Remains Profitable...

[Antsy]

Title says is all... but interestingly, despite ARLA's obviously bearish stance about tax breaks, only 10 percent of landlords would cut and run if mortgage interest wasn't tax deductable anymore. The rest would do little, dither or ignore it. So, if it's not going to create chaos, shouldn't Gordon go right ahead? (I've deliberately ignored the bit about how BTL has been benevolent enough to offer us all SUCH, SUCH 'choice in housing', because I'm currently trying to stay off the beta-blockers)

Full text:

Buy to let expectations remain positive - just don't tinker with the tax

With relatively low loans on their investment properties, more than half of all Buy to Let investors expect to increase their portfolios over the coming twelve months and 90% of investment landlords said they would not sell should house prices fall, according to the latest ARLA quarterly Review and Index published today, Monday 24 September.

This is based on the largest independent survey of the Private Rented Sector.

However, if the summer's demands for changes in the tax regime for residential property investment were to be met, a significant number of investors would then consider selling, this latest Review shows. It is tax changes that would severely damage the Private Rented Sector.

The ARLA Review and Index for the third quarter shows that 54% of all landlords surveyed during August expect to make further Buy to Let investments during the next twelve months. However, if mortgage interest ceased to be an allowable business expense, more than four out of ten, 42%, said they were uncertain what they would do.

And, a significant minority, 28%, said they would certainly sell some property, while ten percent said they would sell out of the Private Rented Sector altogether.

Commented Ian Potter, ARLA Operations Manager, "With the institutions less interested in the Private Rented Sector and private equity companies not filling the gap, the loss of any private individual investors would seriously effect the rental market and severely curtail choice in housing.

Buy to Let Expectations

"Private Buy to Let investors have refinanced the Private Rented Sector and restored social acceptability to renting," Ian Potter added.

The quarterly Review and Index is based on data from the largest surveys of investment landlords and lettings agents in the Private Rented Sector. For the summer quarter, and despite the holiday season, 191 landlords and 463 ARLA member letting offices responded.

These in-depth, independent surveys are supported by the ARLA Group of Mortgage Lenders: Bank of Ireland, Cheltenham & Gloucester, GMAC RFC, Mortgage Express, NatWest and Paragon Mortgages.

The average Loan to Value ratio for Buy to Let investors in the last Quarter was 59%, marginally less than in the previous quarter. The proportion with loan to value ratios between 51% and 75% has dropped marginally, with a corresponding rise for those with ratios between 25% and 59%. Just over a quarter of all Buy to let investors have loan to value ratios of between 76% and 90%, with only 1.3% with loans to value of more than 90%.

The Review and Index continues to show that the vast majority of landlords invest for the long term. The average life expectancy of their property investments is 16.5 years, with nearly a quarter expecting to hold their investments for more than 20 years.

Over half of all landlords are investing for long term capital gain, while the number looking for a combined yield from capital appreciation and rental income dropped from 45% to 40%. Very few, only 2.5%, look to make short term capital gains.

The Review shows annual rates of return, including rents and capital appreciation, for the last quarter across all regions as averaging 11.34% from an outright cash purchase of residential investment property and 22.26% from a geared residential property investment.

Edited September 24, 2007 by Antsy

[DabHand]

My ****!

Paying 40% on what was previously offset against interest payments would make any BTL bought since 2000 entirely untenable. That 10% are the only ones who understand it. I think another 10-20% are old timer BTLers with little to no mortgage. The rest are idiots.

[VacantPossession]

I wouldn't believe a single word published by the Association of Residential Letting Agents. Who do they represent: a load of money-for-old-rope band wagon climbers, most of them semi-literate (from the sight of their typical letting agreements and letters), and whose vested interest is to keep the BTL status quo moving along.

I don't believe for one moment that the average BTL is in it for the long term. A lot of them are jumping ship now, hence record numbers of former BTL properties for sale.

VP

[THE BALD MAN]

I wouldn't believe a single word published by the Association of Residential Letting Agents. Who do they represent: a load of money-for-old-rope band wagon climbers, most of them semi-literate (from the sight of their typical letting agreements and letters), and whose vested interest is to keep the BTL status quo moving along.

I don't believe for one moment that the average BTL is in it for the long term. A lot of them are jumping ship now, hence record numbers of former BTL properties for sale.

VP

Without tax relief on mortgage interest BTL would be loss making (unless funded without dent). My question would be what about companies running property businesses- would this tax relief be withdrawn and turn them loss making as well?

A sensible compomise would be a maximum level of deductible borrowing against a property value e.g. 60%. (Problem would of course be valuation.