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Buy to let makes 4.1% for landlords in 2009
Buy to let investment has ended the year on a positive, according to property-giant LSL Property Services.
The average landlord acheived a rental of £7,600 per property over the year – a yield of 4.6%. Although they also made an average £600 loss on the capital value of each property (in 2008, average capital losses were £23,000). Taking this loss and rental voids into account, buy to let still produced an average return on investment of 4.1%.
Over the year, average monthly rents were at their lowest point in February 2009 at £648 pcm. By the end of November 2009, they had recovered to £665 pcm (the years highest rents were recorded in Spetember at £669).
David Brown, commercial director of LSL Property Services, said: “After a difficult year, the end of 2009 has seen buy-to-let return as a profitable investment. Returns have not only turned positive- they’ve hit an 18-month high. Property bought a year ago and rented out is making a handsome profit for investors. With property prices rising, landlords are making impressive capital gains as each month goes by too. In November, landlords chalked up £1474 in capital gains on a typical rental property.”
“Houses have clawed back much of the value they lost during the downturn, fuelling returns for investors. House prices won’t race up next year at the rate we’ve seen since April.
“The impact of public spending cuts is looming on the horizon and continued mortgage rationing is still a concern. We should still see a small rise of about 5% over the next 12 months, but these factors could conspire to restrain price inflation in 2010.
“2009 marked a watershed for the private rental sector, and landlords have had to ride out the economic storm. 2010 is likely to be equally critical with regulation of buy-to let mortgage lending set to be introduced. Regulation should help filter out unscrupulous mortgage advisers which will be positive for the sector.
“The downturn has already pushed many of the short-term investors out of the market too. Buy-to-let is an essential part of our housing market – we need well capitalised, experienced, professional landlords. With returns rising, they can once again look forward to investing more in the sector to meet our housing needs.”
Buy to let to hit 10% returns in 2010
So what will buy to let investments do for landlords in 2010? According to LSL, a healthy 10% overall profit as the average capital increase should be around £8,000 with the average rental income hitting £667 pcm.
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