Thursday, 12 January 2012 12:10 PM
Restricted mortgage lending and soaring demand for rental properties is continuing to push up rents and profits for buy-to-let investors, according to a new survey.
Mortgages for Business said demand remained strong for the buy-to-let sector as a whole, with investors enjoying higher yields than in other asset classes. The number of mortgage products available has also risen by 48 per cent since the start of 2011.
In contrast, the market for owner-occupied mortgages is still blocked by restrictive lending and house prices that are high in relation to earnings – which is fuelling rental demand.
David Whittaker, managing director of Mortgages for Business, said: "Mortgage finance remains restricted for potential owner-occupiers, meaning there is a vast backlog of buyers who are confined to the rental sector.
"This is keeping demand astronomically high and pushing up the cost of renting into uncharted heights.
"With economic conditions congealing, property prices will remain low and demand for rented property should hold steady, meaning the healthy returns available from buy to let show no signs of abating."
The survey also shows that homes in multiple occupation (HMOs) and buildings with a mix of homes and commercial space are delivering bigger profits for buy-to-let investors than conventional housing.
Mortgages for Business says HMOs delivered a 9.9 per cent yield in 2011 and semi-commercial property delivered 7.8 per cent. In contrast, average yields on what it calls 'vanilla buy to let' fell slightly to 6.1 per cent.
Semi-commercial property, with buildings that have shops or offices with one or two flats above, have proved increasingly popular with landlords as they mix more than one type of tenancy and rent.