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1 in 5 home buyers to invest in buy-to-let

A fifth of those planning to buy a home in 2007 will purchase their property as an investment, according to research by buy-to-let mortgage lender, Birmingham Midshires.

The findings also reveal that in 2006 Northern Ireland provided the largest return on investment properties.

As part of an ongoing study of the specialist mortgage market, Birmingham Midshires asked a GB representative sample of 2,000 people whether they plan to invest in property during the next 12 months.

At a time when the value of the UK's buy-to-let property markets stands at over £94.8 billion , the latest findings from the lender reveal that as many as 40% of twenty-something's planning to buy a property in 2007 will do so as an investment, as will one in four single parents.

Examining the market in 2006, the top five property hotspots are identified below. The dynamic nature of the property market means these hotspots are always changing with regional movements.

Tim Hague, director of mortgages at Birmingham Midshires commented: "The buy-to-let market has grown consistently over the past decade. When you consider the returns available, in terms of both capital appreciation and rental yield, it's easy to understand why property investment continues to grow in popularity. A growing number of people see property as an important part of a balanced investment portfolio."

Key facts on the buy-to-let market:

• The buy-to-let market is currently worth £94.8 billion, and as many as 330,000 buy-to-let mortgages were taken out during 2006 - representing as much as 11% of all new lending.
• Over the last 10 years, average weekly rents have increased by 37% - 1.3 times the rate of inflation. Average weekly rents have increased from £75 to £118.
• Birmingham Midshires was 2006's biggest buy-to-let mortgage provider.
• On average, buy-to-let has consistently outperformed other investment opportunities. Since 2002 the average return to a FTSE100 shareholder stands at 6.9%, compared with the average interest rate for savers of 3.9%. In contrast, buy-to-let investments make an average return of 11.25% for investors (Rent & Capital Appreciation against initial costs).
• High house prices in Central London have resulted in good capital appreciation for investors (217% over 10 years). Buy-to-let investment in Central London returns an average annual rental yield of 4.7% compared with 5.9% in Manchester and the North West.