Buy-to-let market remains strong

Permalink: Buy-to-let market remains strong
by Kay Murchie

According to Paragon, the property specialists, landlords have been buoyed by strong rental demand in spite of high interest rates and increasing property prices causing a slowdown in the mortgage market.

Over the last 3 months, rents increased by an average of 3% - a rate of 12% annually. This has allowed landlords to offset higher mortgage repayments with increasing rent yields.

During July, the average landlord property value rose by 1% and total returns on property was at 11% - the highest level since April.

A spokesperson for Paragon observed that owner occupiers are struggling under the weight of higher borrowing costs. Consequently, buy-to-let landlords can provide accommodation for the increasing number of young people who want a flexible lifestyle or who do not want to get a foot onto the property ladder yet.

According to statistics from the Council of Mortgage Lenders, 12% of all mortgages issued during the first 6 months of 2007 were in the form of buy-to-let. Further statistics from CML show that only 0.63% of buy-to-let mortgages were in arrears for more than 3 months during the first half of 2007, compared with 1.06% in the broader market.

CML remarked that landlords earn revenue on their property and can also increase rents whereas owner occupiers are unable to.