Landlords in buy-to-let for the long term despite interest rate rises

Despite the prospect of future interest rate rises, landlords expect to stay in the buy-to-let market for the long run, with the majority of them (53%) intending to remain in the market for over 10 years.

According to research undertaken by BDRC for Alliance & Leicester Mortgages, confidence in the buy-to-let market is high with over a quarter (29%) saying they will remain in the market indefinitely. Even the spectre of rising interest rates will not deter them as most will either increase rents (38%) or simply do nothing (32%), perhaps having already made provisions to cater for this eventuality. Only two per cent are likely to sell some, or all, of their letting property because of rising rates.

Overall prospects for the buy-to-let market are optimistic according to three-quarters (75%) of landlords. They are clearly feeling buoyant about the outlook for this market - over three-quarters (78%) are positive they will get strong capital gains and over two-thirds (68%) think rental yields will produce good returns.

Mehrdad Yousefi, Head of Intermediary Mortgages at Alliance & Leicester comments:“This upbeat view of the buy-to-let market from those at the coal face is encouraging. Landlords’ love affair with the buy-to-let market is not without justification and it comes as no surprise that four in ten (41%) expect to buy further letting property in 2007. The research also reveals a further two thirds (67%) of those planning to sell investment property, are selling in order to make further purchases and expand their property portfolio, pointing to a buoyant 2007 for the buy-to-let market.”

Mehrdad Yousefi continues: “With the majority of landlords expecting to stay in the buy-to-let market for the long term, there is no doubt the sector will remain an important and stabilising part of the overall housing market.”

Buy-to-let income and returns

The buy-to-let market continues to be a lucrative venture for most landlords. For a quarter (25%), the business of buying to let is their main form of income with nearly half (44%) saying while it is not their main income now, it could be in the future.

Most landlords are making notable returns in the buy-to-let market. Over two-thirds (71%) say they make a profit when comparing their letting income with their letting costs. With the majority of landlords able to use their rental yields to add to their main income (51%), one in five (20%) say their profits are significant enough to live on. However, nearly three in ten (29%) say they either break even or make a small loss in this business.

Mehrdad Yousefi continued: “The research paints a particularly profitable picture for most landlords. However, some caution may be necessary as while most landlords are riding high at present, the market may not be profitable at all times. While none of the landlords questioned reported large losses, just over one in 20 (six per cent) said they experienced small deficits. Professional landlords will continue to experience good returns as long as there is demand for rented property but they would do well to consider and plan for any possible less profitable periods.”