Buy-to-let still offers sound returns

Buy-to-let investments will continue to offer attractive rates of return compared to other asset classes, but investors will increasingly search out cheaper and higher yielding properties, research has found.

The report also predicts that interest rates are set to rise by a quarter of a point in the next few months and that house price growth will have slowed to between 2 or 3% a year by the end of 2018.

The special report on the buy-to-let market looks at the macro and micro economic environment for buy-to-let investors and the factors that are likely to influence landlords investment choices over the coming years. It also highlights the need for a flexible and competitive buy-to-let mortgage market. This is to facilitate continuing investment in a sector of the housing market that has grown in significance as home ownership has declined and demand for good quality residential property has increased.

The private rented sector has grown substantially in recent years. One in five (4.7 million) households in England now rent privately. Nearly half of 25 to 34-year olds live in the private rented sector (46%), almost double the percentage in 2006 (24%). There has also been a considerable increase in the proportion of 35-44-year olds in the private rented sector over the past decade, rising from 11% to 29%.

Buy-to-let mortgages play a vital role in supporting housing supply in the private rented sector, with the market representing nearly 13% of new UK mortgage lending.

The market grew from 840,000 buy-to-let mortgages outstanding with a total balance of £93.2bn at the end of 2006, to 1.8 million buy-to-let mortgages with an aggregate balance of £214bn by the end of 2015; growth of 114% and 130% in the number and value of balances outstanding respectively.

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