Lettings business set for a buoyant autumn

Sunday, 4 September 2005 12:00 AM

The lettings business is buoyant and is likely to become more so during the autumn, according to a buy-to-let mortgage provider.

Prices of investment properties are on the rise, and rents have increased more than three times the rate of inflation, buy-to-let mortgage specialist Paragon Mortgages says.

Its buy-to-let index for August reveals that investors are paying nearly six per cent more for properties than they were four months ago, while rents have risen by 10.5 per cent over the last twelve months.

Paragon Mortgages managing director John Heron said the uncertainty surrounding the housing market was fuelling additional rental activity.

"From our research we know that many people rent out of choice rather than need. They choose to rent for a variety of reasons: because it avoids the need to commit to living in the same area for a fairly long period of time; because they can rent a better quality property in a nicer area than they could afford to buy; or maybe simply because they enjoy the opportunity to share with friends."

He added that "the lettings business is pretty buoyant, and is likely to become more so as the autumn progresses".

In August, property prices paid by investor landlords were almost £8,400 or 5.5 per cent higher than in April.

Landlords paid on average £160,984 for a typical investment property in August, compared with £152,622 in April.

Prices stalled between November 2004 and April 2005, but despite this the average price paid in August 2005 was 13.7 per cent higher than twelve months earlier when it was £152,622.

"The market took a breather in the winter and early spring 2004-05, which translated into flat property prices paid by landlords," Mr Heron added.

"More recently there's been growing evidence that landlords are willing to engage in transactions and that is having the effect of moving pries of investment properties purchased gently upwards."

August's buy-to-let index shows a small fall in the average total annual return, which takes into account the increase in value and the average rental return on a property bought twelve months ago.

It fell to 20.3 per cent in August, from 22.3 per cent in July; but regionally returns of over 40 per cent can be found in the north, and just below 40 per cent in Yorkshire.

Mr Heron said August's figures reflected a renewed confidence in the private rented sector, and landlords were continuing to watch the market carefully.

"If the neighbourhood hospital is expanding, or there is an influx of students at the local college or university, or an areas is growing in popularity with workers at a new office block, landlords will regard this as a buyer signal.

"It's a matter of being close the ground, knowing the market and understanding its dynamics."

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