Increase in buy-to-let Investments
Association of Residential Letting Agents (ARLA) released a report in March 2009 on numbers of landlords purchasing properties in the first quarter of 2009 and revealed an increase of 4.7% compare to the previous quarter.
It has been claimed that buy-to-let properties are an excellent long-term investment. As the house prices were falling hugely since first quarter of 2008 (see graph below), now could potentially be a good time to buy and boost the landlords’ existing portfolio.
Undergoing the economic recession, house prices will one day be at their lowest; Association of Residential Letting Agents (ARLA) released a report on the survey of their members showing that 8.2% landlords were purchasing more properties in the first quarter of 2009, which is a 4.7% increase compared to the previous quarter. This increasing number of landlords buying properties has outweighed the sales, which this trend is significantly resulted in its first time in two years.
Reasons for increase in buy-to-let investment
Economic Recession has a large effect on the increase in the buy-to-let industry:
- Decrease in house prices is resulted from economic downturn. Low house prices attract individuals to grab this opportunity to invest and make money. This attracts more individuals to expand their capital and invest.
- Homeowners are trying to reduce expenditure by downsizing their houses in recession. Yet, people who downsized their houses found their existing properties harder to sell. As the result, they choose to rent them out as the last resort.
ARLA also revealed the data of the types of property supplied onto the rental market because they cannot be sold in the first quarter 2009 as followed:
- Semi-detached – 68%
- Detached – 67%
- Terraced houses 52%
- Flats – 29%
- Studios – 11%
Source: survey from Association of Residential Letting Agents (ARLA) in first quarter 2009
Advice for both new and existing landlords
1. Before investing in properties, landlords have to consider the following factors:
- Property price to decide if the investment is worthwhile
- Expected rental income
- Opportunities for discount on the market value
- The availability of financial products
2. It is wise for new landlords to look for regulated local letting agents that are abided by a code of practice.
3. It is also important for landlords to purchase suitable insurance for their rental houses in order to secure themselves under the current situation.