Assetz® News - British buy-to-let bringing big bucks

British buy-to-let bringing big bucks

16th July 2007 |

Landlords in the UK are cashing in on a buy-to-let boom, with those in Northern Ireland topping the league for impressive returns. Over the last 12 months, buy-to-let investors in Northern Ireland have experienced returns of 35.9 per cent – the highest in the UK – according to a Birmingham Midshires report.

The bi-annual review of the buy-to-let market revealed that overall, UK landlords have seen an average return of 13 per cent in the 12 months to June this year. This is more than one per cent up from the preceding year.

After Northern Ireland, the top performing region was Scotland, where buy-to-let investors saw returns grow to 16.6 per cent. In the south-east, landlords experienced gains of 13.9 per cent.

And while returns escalated on buy-to-let properties in Northern Ireland, average house prices have also risen by 30.5 per cent. This is the biggest rise across the whole UK.

The Birmingham Midshires report states that Northern Ireland property prices have been "driven up sharply" thanks to a combination of strength in the local economy, increased immigration activity, high demand from second homebuyers and investors from the Republic of Ireland.

The Halifax House Price Index also noted that Northern Ireland was at the top of the league for house price growth in the second quarter of 2007, with values escalating by 8.5 per cent in the three-month period. This followed a record-breaking first quarter when average house prices burst through the £200,000 barrier for the first time.

In April, Halifax reported that the ten UK towns that had experienced the biggest house price rises in the preceding year were all in Northern Ireland. Craigavon and Newtownards topped the hotspot list with average increases of 55 per cent.

Nationwide also noted the impressive growth in property values, which it noted was the fastest since records began in 1973.

So what type of property will offer the best yields for the buy-to-let investor? It seems like terraced houses are the way forward, if considering performance over the last year. According to Birmingham Midshires, terraced houses were the big money spinners for landlords over the last year, with average returns of 15.9 per cent.

In addition, the report also noted that these are the cheapest properties for buy-to-let investment, costing an average £116,884.

And the future looks bright, as it is predicted that the current high demand for private rented accommodation will persist. As many potential first-time buyers are forced to rent as they struggle to take their first step onto the property ladder, demand for rental property remains high. In addition, the student population is ever-growing, as are levels of immigration.

Birmingham Midshires believes these factors will also inflate rents in the short-term and "lead to continued capital appreciation over the long-term". Group economist Tim Crawford added there are "sound" fundamentals that underpin the buy-to-let market.

"While house price growth in the sector is expected to be more subdued near term, reflecting the impact of higher interest rates, the potential for further increases in rents should encourage long-term investors," he said.