Buy-to-let investors have shrugged off a slide in the value of rented houses with almost half of existing investors planning further purchases in the market.

Nine out of 10 landlords have no intention of selling their properties, according to the fourth-quarter survey of the Association of Residential Letting Agents. Four out of 10 expect to invest further in the private rented sector this year.

Buy-to-let investors have shrugged off a slide in the value of rented houses with almost half of existing investors planning further purchases in the market.

Nine out of 10 landlords have no intention of selling their properties, according to the fourth-quarter survey of the Association of Residential Letting Agents. Four out of 10 expect to invest further in the private rented sector this year.

Arla said the findings were the first to show that confidence in the buy-to-let market had stood up to problems caused by the credit crisis.

“This is good news for the housing market, particularly as it comes from surveys carried out well after the credit crunch had begun to bite,” said Ian Potter, Arla’s head of operations.

There have been fears that the buy-to-let market could grind to a halt as the cost of financing begins to rise at the same time as prices in the housing market fall.

Lenders have certainly tightened buy-to-let lending criteria and raised rates in recent months to reflect their own difficulties in borrowing money on the wholesale money markets.

The average value of rented houses fell by 1.3 per cent over the quarter, according to Arla, with falls of 5.2 per cent in the south-east and 4.5 per cent in the rest of the UK being offset in part by a 2.9 per cent appreciation in central London.

Arla said that the market was being sustained by the income being generated and a healthy level of demand from occupiers fuelled by a shortage of available housing.

The average rate of return on a cash purchase of residential investment property was 10.8 per cent last quarter, and for geared investments, assuming a 75 per cent mortgage, 21.4 per cent.

The survey showed that buy-to-let investors borrowed an average of 70 per cent of the purchase price, down from 74 per cent in the previous quarter, which an Arla spokesman described as a sustainable level of borrowing.

But Arla warned prospective investors to avoid buying property “off-plan” – not yet built – which it described as risky in current market conditions. The survey showed that 7.5 per cent of purchases were made off-plan during the last quarter.

Recent studies from lenders such as Bradford & Bingley and Alliance & Leicester have shown similar levels of confidence.

“We’re sanguine about the market as long as investors have a long-term strategy,” said Martin Gahbauer, senior economist at Nationwide, who added there were concerns about new investors buying into the market at this time.