Despite evidence of a slowdown in the wider market, Birmingham Midshires, in its bi-annual review of the sector, indicated that average total return for investors reached 16.3 per cent in 2007, an increase of 2.8 per cent from the previous years’ findings.
The paper also showed that the average price of a BTL property increased by 10.9 per cent over the course of 2007, to an average price of £154,795, while rental yields rose to 5.4 per cent.
Commenting on the findings, Tim Hague, managing director of mortgages at Birmingham Midshires, said: “Total gross returns in the BTL sector were a healthy 16.3 per cent in 2007. BTL house price growth has edged higher over the past year. Rents continue to rise across the country, boosting returns.
“The fundamentals underpinning the BTL sector are sound. They include strong demand from higher immigration levels and housing affordability concerns for first-time buyers.
"However, we expect property price growth to be more subdued in 2008, largely reflecting the impact of higher interest rates.”
Andy Young, chief executive at The Business Mortgage Company (TBMC), said that the strong student population, a more mobile workforce and increasing immigration would continue to fuel the demand for private rented accomodation.
He explained: “The BTL market has performed well in the last 12 months and rental yields have been good in most areas of the country. Although the credit crisis has affected the UK financial environment in a number of ways, the BTL market and investor appetite should continue to grow in the next 12 months.
"The key drivers in this market, such as large student populations and a more mobile workforce are still strong, and immigration numbers are also expected to remain high, which will also strengthen the demand for good quality rental accomodation.
“These factors will continue to fuel the demand for rental property and put landlords in a good position to increase rental yields.”
