Buy-to-let properties could be a more secure investment than stocks and shares, according to the latest report from Bradford & Bingley.
The Residential Lettings report has found that letting property can provide a more consistent source of income than some investment portfolios with gross returns of up to 10% of the property’s value, which is also accompanied by a high capital growth.
Yields vary according to the property type and area, but the most popular type of property is two bedroom flats where returns can be as high as 10%, whereas with a four bedroomed detached house the yield is only 5%.
This sector has been boosted by ever increasing house prices which have meant that first time buyers are being increasingly priced out of the market, and 47% of tenants now fall into the 25 to 35 age group.
John Heron, managing director of specialist buy-to-let lender Paragon, said this was not a surprise as the existing stock of property lettings is now dominated by terraced housing and two-bedroomed flats.
‘Long-term demographic projections show there will be large scale growth in the number of households containing single people, both young and old, those with mobile jobs, and students looking for such properties. The increase in the rental sector is projected to grow to 15% of the market in the next 15 to 20 years,’ he said.
Commenting on the report, John Crossley, head of Bradford & Bingley Letting Agents, said yields have tightened since the last report in spring due to property values increasing.
‘However, as global stock markets remain volatile, investors are looking at alternative opportunities and buying property to let is continuing to prove an attractive option within the vast array of investments now available. Landlords may be concerned that property prices are soon to slip. They should be assured that even if this does happen, tenant demand for rented property would most likely increase securing further investment benefits,’ he added.
The report also found that although the average time taken to let a property from instruction by a landlord to finding a tenant has fallen from five to four weeks, success in the market is still dependent on picking a property ‘hot spot’ to invest in.