Rental yields from buy-to-let properties are remaining stable as confident landlords continue to invest and grow their portfolios.
That was the picture that emerged from the latest snapshot of the buy-to-let market by Solihull-based specialist lender Paragon Mortgages.
The private rented sector performed strongly in the first half of the year as demand for rented homes from inward migrants and other types of tenant grew, Paragon said.
Evidence that investors are continuing to snap up properties emerged from recent data from the Council of Mortgage Lenders.
This showed that the value of new buy-to-let loans extended to landlords reached a record £17.5 billion in the first six months of 2006, 20 per cent higher than in the second half of 2005.
Average yields achieved by landlords remained steady at 6.04 per cent, despite a slight seasonal slowdown in property prices, which eased marginally between June and July - down from £172,772 to £171,996.
John Heron, managing director of Paragon Mortgages, said: "The first half of 2006 has proved a particularly buoyant time for residential property investors, who have grown their portfolios strongly on the back of an upsurge in tenant demand, particularly from inward migrants.
"Recent official figures show that 600,000 migrants from EU accession states have come to this country since the enlargement of the EU, and the majority of these look to the private rented sector for their accommodation needs.
"Sustained demand leads to firming of rents. We've seen rental incomes rise by almost 2.8 per cent this past quarter, while yields have remained stable in recent months. With these positive trends repeated in most parts of the country, buy-to-let lenders have lent over 152,000 loans to investors in the first six months of this year. We have seen solid activity up and down the country, with landlords making their investment decisions on the basis of attractive yields combined with the expectation of capital appreciation over the medium to long term.
"With the UK continuing to face a structural shortage of accommodation and steady expansion in the number of households, demand for rented (and indeed owneroccupied) housing will continue to grow."