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Landlords are buying more properties than they are selling for the first time in two years, according to the Association of Residential Letting Agents (ARLA).  And low interest rates could give the private rented sector an added boost.

In its latest survey to the end of March 2009, ARLA reported that the number of letting agents reporting that landlords were buying properties had doubled compared to the previous three months.  A lower number said that landlords were selling properties.

Confidence appears to be rising despite an oversupply of properties in the rental market, largely created by "reluctant landlords" who are letting properties that have not sold for what they consider their real market value.

Ian Potter, operations manager of ARLA, said: "Whilst in general it appears that there is an oversupply of rental properties to let, this does not mean that in certain areas of the country there isn't a shortage of property. It very much depends on the type of property, the experience of the landlord and the quality of advice they receive that makes the difference in identifying a good opportunity to invest."

The findings were supported by the latest Private Rented Sector (PRS) report from Paragon Mortgages. 

The report shows that the average annual yield on private rented property is now 6.2 per cent, up from 5.7 per cent a year ago.  The survey also found that nearly a quarter of buy-to-let investors (23 per cent) are planning to purchase investment property in 2009, with 29 per cent of those funding their purchase from cash savings.

With millions of savers languishing on savings rates of less than one per cent, residential investment property could potentially offer significantly better returns, according to Paragon.  But the company warns that investors must be careful about choosing the right property.
 
Managing director, John Heron said: "There are opportunities for cash rich individuals to generate better returns in the current environment through residential investment property. Savings returns are poor because of the reduction in Bank of England Base Rate and equities remain unpredictable and erratic.
 
"The outlook for house prices in the short-term is still uncertain, but yields are strengthening because tenant demand is strong and property investors are able to pick up bargains. Experienced buy-to-let investors already appear to be taking advantage of low property prices and are adding to their portfolios, but we may see investors that have never considered property before purchasing rental investments".