Buy-to-let investors snapping up bargains

Last month buy-to-let investors showed their faith in the market by snapping up cheaper properties, new figures reveal.

Paragon Mortgages, a specialist buy-to-let mortgage lender, reveals data that shows the average price which landlords paid for investment properties fell slightly in March, while activity among landlords stayed strong.

"At the end of 2005 and especially the start of 2006, we witnessed a significant pick-up in activity in the buy-to-let sector, with professional and smaller scale landlords alike purchasing additional properties in response to identified demand from tenants," said John Heron, managing director of Paragon Mortgages.

"Since November, property values had been rising steadily, but this month saw an easing in prices paid. This reflects the fact that tenant demand is strongest for smaller homes, as singletons and young couples look for clean, simple rental properties to fill their accommodation needs.

"As serious investors buy in response to actual tenant demand, average prices paid have eased a little."

March saw the average price paid by landlords fall 1.5 per cent to £161,039. But even with this fall, property values remain 5.5 per cent higher at the same time last year.

As the number of smaller properties being bought rises, the average rent has naturally fallen a little to £10,082. However, average yields have stayed strong at 6.26 per cent.

"What is important is that at these yields landlords are confident to buy — and they are buying with a vengeance," Mr Heron added.

"Landlords typically have a ten-plus year perspective on the market. Over the long term they are convinced that a combination of rental income and capital appreciation will make these additions to their property portfolios an attractive investment proposition."

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