Money Magic

Alliance and Leicester Mortgage reports that professional landlords in the buy-to-let market are set to reap the rewards of the current real estate market.

London will continue to be the most popular region for property investors, while Scotland and the north of England will show the fastest growth. 

The firm’s research revealed that professional landlords with strong portfolios demonstrated the most financial security, and some were able to save a portion of the income they earned from letting. Not so the traditional home buyer. 

Nearly half of those owning 20 or more properties earned enough to add to their savings.  An additional 40 earned enough through their property dealings that their portfolios provided their entire incomes. More than 70 percent of those surveyed were optimistic about their prospects for the New Year. 

Landlords who owned properties in London saw the highest level of earnings.  The survey of landlords revealed that rents on properties in the central city can be more than four times those of buy-to-let properties in the south-east of England. 

During 2008, rental yields on properties in Scotland should increase nearly five percent. Properties in the north of England should yield an additional four percent, according to the survey. 

Jeremy Claridge, the head of specialty mortgages at Alliance and Leicester, is encouraged that buy-to-let landlords are optimistic about the outlook for 2008. He believes that the property market remains healthy for landlords with a history of success, especially for those in the south-east of the country in spite of the difficult financial situation.

The downturn in the housing market is stimulating the demand for rental properties, according to the Royal Institution of Chartered Surveyors (RICS). Fewer renters are looking for flats, however. 

Incentives used to attract potential buyers have dried up, leading to an increase in tenant lettings.  Landlords are seeing benefits from current economic uncertainty. 

RICS reports that family houses are attracting more tenants than flats.  The most recent data shows that over 25 percent of surveyors report an increase rather than a drop in the demand for houses.  In contrast, only 19 percent report an increase in the demand for flats, down from nearly 40 percent in the last quarter. 

Tighter lending standards and increases in interest rates are having an impact on the buy-to-let market, according to RICS spokesman Jeremy Leaf, leading to some uncertainty for landlords. 

Nonetheless, Leaf believes that economic uncertainty and rising rents will benefit landlords.  At the same time, increasing rents will make it more difficult for potential home buyers to raise the necessary capital.  They will find it increasingly difficult to get into the housing market.