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Lenders say buy-to-let boom will continue

Buy-to-let lenders are are still positive despite warnings of a market downturn and the Bank of England saying property price leaps are unsustainable.

Paragon Mortgages and Capital Home Loans say they are confident about the future of the letting market. They argue that property is a good long-term investment compared with alternatives such as the stockmarket.

Paragon says its latest mortgage property investor confidence-tracking index shows higher than expected rental yields, low average gearing and few instances of properties lying empty between tenancies.

It shows that 58 per cent of landlords receive a gross annual return of between 6 and 10 per cent of the market value of their properties, with the average yield being 9.6 per cent.

Landlords expect their property portfolios to grow by an average of 8.8 per cent over the next year. Properties lie empty for an average of only 18 days a year and it takes three or fewer visits by prospective tenants before a property is let.

Capital Home Loans says there are a number of factors pointing to an expansion of buy-to-let, including forecasts from analyst Mintel that the market will rise from £14.7bn to £20.6bn by 2010.

Sales and marketing director Bob Young says: “Demographics do not lie. There is a shortfall of 65,000 dwellings a year for each of the next eight years. That is a cumulative shortfall of 520,000 dwellings a year. If people cannot buy, then they will rent. To say there is a bubble waiting to burst is way off the mark.”

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