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Buy-to-let returns rise to 16.3 per cent in 2007

Research from BM Solutions has found that the average total return for a buy-to-let investor was 16.3 per cent in 2007, up from 13.5 per cent in 2006.

It says that the average price of a typical BTL property in the UK increased by 10.9 per cent during 2007 to an average of £154,795. The average price of a BTL house is 27 per cent lower than the average paid for an owner occupied property at £197,039 in December.

Rental yield on UK BTL properties rose marginally to 5.4 per cent in 2007.

BM Solutions says that Northern Ireland BTL investors had strongest gains with totaln returns of 44.3 per cent in 2007.

The firm says it expects the slowdown in the BTL market to continue into 2008. It says that average total returns for BTL investors in 2008 are not expected to be as strong as in the recent past.

BM Solutions managing director Tim Hague says: “Total gross returns in the BTL sector were a healthy 16.3 per cent in 2007. BTL house price growth has edged higher over the past year. Rents continue to rise across the country, boosting returns.

The fundamentals underpinning the BTL sector are sound. They include strong demand from higher immigration levels and housing affordability concerns for first time buyers. However, we expect house price growth to be more subdued in 2008, largely reflecting the impact of higher interest rates.”

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