2007 strong for buy-to-let mortgages

Published: December 14, 2007

Buy-to-let investors had a good year in 2007, with total annual returns generated by the average residential property reaching the highest level for 28 months at 21 per cent, according to buy-to-let mortgage provider Paragon.

Buoyant house prices coupled with strong rental income and stable demand from tenants saw landlords generating more than £34,500 on average over the last year. Growth in rental incomes rose by 17 per cent over the year, with a six per cent rise in the last quarter alone. The average annual rent now stands at £11,300.

John Heron, director of mortgages at Paragon, said: "Returns generated by landlords are very good and compare favourably with alternative investment classes. Both rents and property values have grown strongly over the past 12 months.

"Looking forward, we can expect further upward pressure on rents to continue as first time buyers remain in rented accommodation for longer," he added. "At the same time, property pricesare expected to ease in some parts of the country, which will represent an opportunity for astute landlords."

Paragon's findings are backed up by a recent report from landlord advice website Property Hawk, which estimates that rising house prices will prompt first time buyers to rent for longer periods, subsequently pushing up demand for rented property and rental yields.