The total number of buy-to-let investors in the UK has risen 8 per cent in the last year to 1.63m last year, according to lettings agent Ludlow Thompson.
The net income of these investors reached £13.1bn in 2012 to 2013, again 8 per cent more than the £12.1bn net income in 2011 to 2012.
Record low interest rates on bank deposits and government bonds mean the sector is continuing to attract new money, according to the agent, which suggested that 5 to 6 per cent yields on investment properties remain achievable in some parts of London.
Capital growth for residential property was more than 7 per cent in 2014 and 16 per cent for property in London, compared with the FTSE 100 increasing by only 0.7 per cent in a year.
Stephen Ludlow, chairman at Ludlow Thompson, commented that recent regulatory changes to the mortgage market are making it harder for potential first-time buyers to acquire mortgages – meaning they stay in the rental market for longer.
The firm stated that the popularity of buy-to-let will continue to increase this year, with the reforms to stamp duty announced in the Autumn Statement benefiting investors.
Under the new rules, there will be no tax payable for houses worth less than £125,000, 2 per cent on the portion of any value above this and up to £250,000, 5 per cent on the next portion up to £925,000, 10 per cent up to £1.5m, and 12 per cent thereafter.
“Also, pension changes announced last year, should allow potential investors to use these funds for a property purchase, offering far greater yields than pension funds,” added Mr Ludlow.
At the end of last month buy-to-let specialist Paragon posted an operating profit of £30.9m for the last quarter - a 14.9 per cent increase from the end of 2013 - driven by buy-to-let completions of £222.1m, an increase of 58.4 per cent compared with the same period in the last financial year.
peter.walker@ft.com
