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Boom time for buy-to-let investors

Boom time for buy-to-let investors

Category: Mortgages

Updated: 22/08/2011
First Published: 22/08/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Optimism amongst buy-to-let investors continues to rise after further strong growth was reported in the rental market.

The average private rent paid in England and Wales rose by 0.6% to £705 per month in July, according to LSL Property Services.

The latest data means rents have now increased for six months in a row, and leaves the average rent £29 a month higher than a year ago.

It is in London, however, where rents have been growing fastest - the average tenant now has to pay £1,009 per month, 7.1% higher than a year earlier.

David Newnes, estate agency managing director of LSL, said rents are on an upward trajectory, and is a trend which is unlikely to reverse any time soon.

"Demand from thousands of frustrated buyers each month is underpinning buoyant competition for rental homes, enabling landlords to increase prices," he explained.

At the same time, the apparent boom in the buy-to-let sector is also evidenced by new data from the Department for Communities and Local Government.

It shows one in every six homes in England is now within the private rented sector, with around 229,000 additional homes being made available to rent since 2009.

Since 2000, the number of properties in the sector, which currently stands at 3.9 million, has risen by 1.8 million.

Nigel Terrington, chief executive of buy-to-let specialist Paragon Group, said the increase has been fuelled by a combination of landlords buying property with cash and buy-to-let mortgages, people letting out homes they have inherited and homeowners deciding to let their property.

After the financial crisis, the buy-to-let mortgage sector shrank considerably as lenders decided to focus their attentions on the residential side of the property market.

According to research, however, product numbers have steadily been rising since the start of 2010.

As a result, 502 buy-to-let mortgages are currently available on the market, compared with the 272 that were available in August last year.

"We are seeing a very different mix of tenants in the sector now," Mr Terrington added.

"No longer is it dominated by students and young professionals - it is a much wider group including more families and mature tenants and therefore we need to have a private rented sector adaptable to suit all."

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