BM Solutions News

Buy to Let returns rise to 16.3% in 2007

16 February 2008

New research from BM Solutions shows that the average total gross return for a buy to let (BTL) investor was 16.3% in 2007 (exclusive of fees and mortgage interest costs). This is up from a total gross return of 13.5% recorded for 2006.

Across all regions of the UK capital values on BTL properties increased. So too did rental values (up 13.1% in year to December). Much of the growth in capital values occurred in the first half of 2007. The impact of the five Base Rate increases between August 2006 and July 2007 led to a more subdued BTL market. Capital growth slowed to 1.6% in quarter four of 2007. We expect the slowdown in the BTL market to continue into 2008. As a result, average total returns for BTL investors in 2008 are not expected to be as strong as in the recent past.

Key findings:

• Average total return for a buy to let investor was 16.3% in the year to December 2007, up from 13.5% in 2006

• Average price of a typical BTL property in the UK increased by 10.9% during 2007 to an average price of £154,795

• Rental yield on UK BTL properties rose marginally to 5.4% in year to December 2007

• Northern Ireland BTL investors had strongest gains with total returns of 44.3% in the year to December 2007

• Average rent in the UK rose to £698 per month in 2007 from £617 in 2006, an increase of 13.1%

• There are no regions where the average price of a BTL property is below £100,000

Tim Hague, Managing Director at BM Solutions, said:

"Total gross returns in the buy to let sector were a healthy 16.3% in 2007. Buy to let house price growth has edged higher over the past year. Rents continue to rise across the country, boosting returns.

The fundamentals underpinning the buy to let sector are sound. They include strong demand from higher immigration levels and housing affordability concerns for first time buyers. However, we expect house price growth to be more subdued in 2008, largely reflecting the impact of higher interest rates. "

For more information, please visit the Buy to Let bi-annual review section within the BM Solutions media centre.

For further information contact:

Clare Mortimer
claremortimer@hbosplc.com
Senior Press Officer

Emma Partridge
emmapartridge@hbosplc.com
Press Officer