Outlook for buy-to-let remains positive

Average rents across England and Wales have risen 3.5 per cent in the year to November, according to the LSL Buy-to-Let Index. Last month saw a 0.4 per cent fall – the first drop in ten months – to £717 per month. However, the average rental yield is now at 5.3 per cent and property analysts believe rental growth will continue in 2012.

David Newnes of LSL said it is these yields, rather than potential capital gains, that are attracting investors to the buy-to-let market. “It is rental income that pays a landlord’s mortgage and, while capital gains are important over the long run, the strength of demand and rents underpin sensible investment decisions.” Nigel Bedford of Largemortgageloans.com believes the outlook for the buy-to-let market will continue to be strong throughout 2012. “There is caution among professional landlords as so many are sitting on very low historic lifetime trackers, and they know that one day rates will go up and impact their profits,” he said. “But all indications are that the Bank of England will not raise base rate anytime soon. So ‘enjoy the benefit’ is very much the order of the day.”

Copyright The Financial Times Limited 2011