Landlords optimistic about buy-to-let prospects in 2008

Buy-to-let landlords are optimistic about the next 12 months, with 71 per cent seeing their overall prospects as good or very good, according to research from Alliance & Leicester mortgages.

Over three quarters of landlords (77%) claim they are making a profit out of their properties, with 22 per cent of these able to save some of this income and boost their savings.

Landlords with properties in Central London believe rental yields can be as much as four times higher (44%) than buy-to-let properties in the neighbouring South East of England (10%). In other regions landlords believe that Scotland will generate a five per cent increase in rental yields next year, and the North just a four per cent increase. They also believe that Wales is the least likely to produce high rental yields, predicting just a one per cent increase.

Jeremy Claridge, Head of Specialist Mortgages at Alliance & Leicester said: “It is encouraging that buy-to-let landlords indicate they are feeling buoyant about the outlook for 2008. Regardless of a tough financial year, it is clear the buy-to-let property market is still healthy for longstanding landlords, especially for those in the South East of the country.

“Our research shows that landlords’ believe London will produce the highest rental yields in 2008 and remain very popular as investment areas, but it is the North of England and Scotland that are expected to expand most rapidly over the next year in terms of projected net growth.”

Regardless of location, it is professional landlords with large portfolios who are the most financially secure and able to save some of the income they earn from letting. Almost half (49%) of those who own 20 or more properties make enough to supplement their savings, and a further 40 per cent are so successful that they rely on their buy-to-let portfolio for their main income.

By contrast, fewer than one in six (15%) investor landlords with just one property manage to save any proceeds from their property and fewer than one in 20 (4%) are able to earn a living from the income generated. When it comes to the outlook for the year ahead, nine out of 10 (92%) of professional landlords are confident or very optimistic about the coming months, whereas just over half of those with one property (56%) share that degree of optimism.

Jeremy Claridge said: “Landlords with only one or two properties expect their investment to break even annually. The long term view is positive house price inflation will yield a positive return over the investment period. Smaller landlords should continue to carefully consider the economics of any investment and ensure that they plan to deal with extended void or less profitable periods.”