Buy to let market tempts redundancy investors

Over a third (35%) of finance professionals* would be tempted to invest a redundancy payout in a buy to let property, according to new research from PropertyEarth.net, the chain free property portal.

While 30% of finance professionals would use a redundancy payout to cover everyday living costs, property is the preferred outlet for those looking to invest their lump sum, followed by a saving account (14.6%), gold (10.7%), FTSE 100 stock market shares (7.8%) and oil (1.5%).

The average severance package received by banking, finance and insurance professionals on redundancy is £21,300, which is now enough to cover the cost of a 25% deposit on a chain free one-bedroom flat listed on PropertyEarth.net, costing £84,208. Listings on the portal, which come largely from lender repossessions and developers selling unwanted stock, are a magnet for investors looking for motivated pricing.

With the average PropertyEarth.net net rental yield at 6.59%, an investor could generate a rental return of £14,037 over ten years after costs, not taking into account potential capital growth. In comparison, the 14.6% who would prefer to invest their lump sum in a savings account, with an average interest rate of just 1.76% currently, would benefit from a £3,408 profit over a ten year period.

The research also revealed that prospective investors are in it for the long haul, with 72% considering property as a long term investment - a clear move away from the pre-recession ‘get rich quick’ property investment mentality.

Dominic Toller, Managing Director, commented: “This research shows that property is still viewed as a strong long term investment, despite the recent volatility. Savvy finance professionals are taking a long term view and are attracted by the returns currently offered by the buy to let market, due to the low prices and high yields of chain-free property in particular."

* 413 financial professionals were surveyed by The Wriglesworth Consultancy in June 2009