Buy-to-let remerges as attractive investment

Nia Williams

December 18, 2009

2009 saw buy-to-let re-emerge as an attractive investment, according to LSL Property Services, owner of the UK’s largest lettings agent network, including chains Your Move, Halifax, and Reeds Rains.

By the end of the year, total annual returns had reached 4.1%, allowing for a rental yield of 4.6% after voids and a small capital loss on falling house prices. In 2009, a typical landlord lost just £600 on the capital value of his property, but earned £8,000 in rent, leading to a total profit of £7,400.

By contrast, in 2008, a typical landlord would have lost 8.8% even after allowing for rental income. This means for 2008, a typical landlord lost £23,000 in capital as the property fell in value, and earned £7,900 in rent for the full year, leading to a total loss of £15,100.

For 2010, landlords can expect to make £8,000 in rental income and at slightly below current trends, capital gains of around 5%, equivalent to a capital return of around £8,000. This would bring a total return of £16,000, or just under 10%.

David Brown said: “Houses have clawed back much of the value they lost during the downturn, fuelling returns for investors. House prices won’t race up next year at the rate we’ve seen since April. The impact of public spending cuts is looming on the horizon and continued mortgage rationing is still a concern. We should still see a small rise of about 5% over the next 12 months, but these factors could conspire to restrain price inflation in 2010. Buy-to-let is an essential part of our housing market – we need well capitalised, experienced, professional landlords. With returns rising, they can once again look forward to investing more in the sector to meet our housing needs.”

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