Buy-to-let “buoyant” in 2006

Specialist mortgage lender Paragon has looked back on 2006 for the buy-to-let mortgage market, describing it as a "buoyant year".

The sector has benefited from rising capital values, stable rental yields, strong demand from tenants and a positive economic backdrop, Paragon said.

Figures from the lender’s buy-to-let index show that the average rental property has increased in value by five per cent, or £7,736, in the past 12 months.

This compares with a 0.8 per cent, or £1,277, uplift in the previous 12-month period.

"In terms of capital appreciation alone, the average buy-to-let investor has made over £7,700 this year just by owning a rental property," said Nigel Terrington, chief executive of Paragon.

"On top of that, he has generated almost £10,000 in rental income, an excellent total return on investment of £17,700, or 11.4 per cent, over the past 12 months."

Government statistics suggest that the buy-to-let sector will continue to be strong in 2007, as inward migration, a key driver of rental demand, is expected to continue at an annual rate of between 185,000 and 190,000 over the next three years.