Anyone for tenants? Landlords live it up

House prices and rents are still rising, says Melanie Bien, and investors are defying the property gloom-mongers
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Although doomsayers predict an imminent collapse in the housing market, the growing band of buy-to-let landlords tells a rather different story.

Although doomsayers predict an imminent collapse in the housing market, the growing band of buy-to-let landlords tells a rather different story.

The popularity of buying property to rent out shows no sign of fading, despite tales of falling rents in some parts of the country and the threat of a further hike in interest rates.

This weekend's Invest in Property show at London's Earl's Court has been packed with rookie investors eager to discover how they can make money out of buy-to-let, as well with experienced landlords looking to expand their bricks-and-mortar portfolio. "There has been an incredible upsurge in people wanting to invest in property both at home and overseas," says Lisa Isaacs, editor of What House? magazine, one of the show's sponsors.

Since 1998, the number of buy-to-let loans has increased by over 50 per cent each year, reports the Council of Mortgage Lenders. There are now 400,000 buy-to-let mortgages in the UK, worth £39bn or 4 per cent of the mortgage market.

The signs remain promising. Although there is evidence of landlords being forced to reduce rents in areas where there is tough competition for tenants, last month's Buy-to-Let Index from Paragon Mortgages revealed this was not the case across the board. Average annual rents rose from £9,651 in March to £9,953 in April, according to Paragon, for an 11 per cent increase over the previous three months. With first-time buyers being priced further out of the mortgage market, they are having to rent for longer - providing landlords with an abundant source of tenants.

Research from buy-to-let lender Mortgage Express highlights the buoyant demand for rental property over the past year. In its latest quarterly survey of landlords, 54 per cent of respondents report that they have experienced no void periods - the length of time for which a property lies empty between tenancies - while 24 per cent had a void period of one to four weeks. Those who did experience a gap between tenants say they were able to cope: 12 per cent paid the mortgage through surplus rent from that property, 8 per cent from surplus rent on other properties, 24 per cent from savings and the remainder from a mix of these.

"Demand for rental property is strong and void periods remain low," says Roger Hillier, product development manager at Mortgage Express.

"There has been some talk lately that the so-called buy-to-let 'bubble' is about to burst. Contrary to these rumours, the evidence clearly shows that the buy-to-let market continues to be healthy."

Many investors are turning to buy-to-let as an alternative to a pension. In the wake of the near-collapse of insurer Equitable Life, and thousands of workers losing their pensions as a result of their employer going bust, the pension industry is still struggling to regain public confidence. For many, property is a more certain way of providing a secure income in retirement.

Choosing the right location remains a vital factor in a landlord's success or failure. If you buy in the "wrong" area, you won't be able to find the tenants you need to cover the mortgage and your outgoings.

Locations go in and out of fashion, but Mortgage Express says the North-west is the most popular area at the moment, with 28 per cent of the respondents to its survey investing in this region. A further 19 per cent are buying in the South-east and 17 per cent in the North-east. Some 13 per cent are considering buying in Wales and the same amount in the Midlands.

The North is also the highest- yielding region at 8.73 per cent, despite a drop from 8.93 per cent in March, according to Paragon Mortgages. The South-east continues to generate the lowest yield - the return on your investment - at 6.64 per cent.

The best yields are those that reflect strong tenant demand for the right type of property. John Heron, managing director of Paragon, says this tends to be the modest home targeted at young professionals, house sharers or "key" workers such as nurses and teachers. And while property prices are rising, landlords are still able to get a good deal.

"Prices paid by landlords continue to climb," he says, "but the average rental property continues to be cheaper than the national average."

The Invest in Property show is on today at Earl's Court. Tickets are £8 on the door. For further details, visit the website,


Kathryn Pedley and her husband Robert (both 33) are so confident about the prospects for the buy-to-let market that they are in the process of buying two terraced houses to rent out in St Helens, Merseyside.

The couple, who live in Solihull, Birmingham, with their three children - Luke, Zac and Leia - already own a house and a flat just outside the city, which they rent out to tenants.

"My theory is that if you are prepared to be in the market for 20 years, you aren't going to have a problem," says Kathryn. "Even if there is a collapse in house prices, I would still be confident because I am looking at the long term."

The Pedleys have opted for two discount mortgages for their new purchases, while their existing buy-to-let properties are on fixed- rate deals. All of these were arranged through broker London & Country.

"The fixed rates look a little bit expensive at the moment, but they do safeguard us if rates go up," says Kathryn.

The couple have found it "very easy" to find tenants and are confident that this won't be a problem with their new investments. They plan to buy another property within the next 12 months.