Assetz® News - Sipps U-turn fails to dent buy-to-let sector

Sipps U-turn fails to dent buy-to-let sector

28th March 2006 |

Back in December, there was some consternation in the UK property sector after Gordon Brown announced the government's self-invested personal pensions (Sipps) U-turn in his pre-Budget speech.

Many seasoned investors anticipated a corresponding slowdown in the market, while it was feared that those who had already made plans for Sipps would be left in limbo.

While the latter point has in some case been true, the property market seems only to have gone from strength to strength in the last few months, with the buy-to-let sector performing particularly well in spite of December's disappointment.

The latest quarterly Review and Index from the Association of Residential Letting Agents (ARLA) has in fact found that landlords expect to buy further investment properties in the next twelve months, while 17 years is now the average period that investors expect to hold on to their properties.

In fact, only 1.1 per cent of investment landlords expect to hold their properties for less than two years, indicating that the vast majority are extremely confident of the long-term benefits of the sector.

"For all the hype and the special deals and curiously expensive symposia, buy-to-let investors prove themselves yet again to be serious, long-term investment landlords. They are driving the long-term financing of the private rented sector. It is precisely what is needed both for the sector and for housing in general," said ARLA chief executive Adrian Turner.

Buy-to-let property investment is clearly a growing sector and it is a form of investment that many are only now discovering for the first time. The latest ARLA review has shown that seven out of ten buy-to-let investors actually only came into the private rented sector after the Millennium, while four out of ten joined within the last three years.

The south-east consistently appears on lists for favourite buy-to-let locations and the ARLA survey indeed indicates that nearly half of all respondents have properties in this area. Then again, 54 per cent own properties between the Midlands and Scotland, with the north-west evidently one of the key choices.

A number of analysts have observed in recent months that rented accommodation is becoming increasingly popular, with many young couples and individuals decided that it is a safer bet to rent than to overreach themselves by putting a deposit down on a house.

There is also a more mobile workforce in the UK which has led many employees to rent apartments, for instance, whilst keeping hold of their first home.

The average length of time that tenants remain in rental properties is now 17.5 months, which is also encouraging. It is up from the previous quarter and it is also the longest reported since the question was first asked a year ago.

Confidence is certainly high in the buy-to-let sector and having coped admirably with the Sipps disappointment, investors are now reaping the benefits with good returns.