Best buy-to-let investment is houses not flats

The best buy-to-let investment for capital gains and rental yields in today's market and in the longer term is in houses and not flats, an expert has said.

Rental property specialist David Lawrenson says demographic changes and the over-supply of flats has made investing in houses a better buy.

Mr Lawrenson points out the percentage of young families choosing to rent has been "rapidly increasing", and with UK planning policy focused around high density flats without gardens, he believes family houses with gardens will continue to increase in value consistently higher than flats.

He adds recent figures from buy-to-let mortgage firm Paragon show rental yields on terraced and semi-detached houses were 0.7 percentage points higher than for flats - 6.2 compared with 5.5 per cent.

"It is not just young people and couples who rent. It seems that a whole new sector of tenants is coming through – working families who like the flexibility that renting offers," Mr Lawrenson commented.

"In today's hire and fire culture, this desire for flexibility is as true for families as for professionals with no children. These are tenants who have chosen to rent because it suits their lifestyle, driving up the demand for buy-to-let houses.

"In addition, landlords often find that houses are more flexible than flats as they can accommodate sharers, families or students more easily than a typical flat."

Mr Lawrenson notes government planning policies may change in future, but it would take "many years" before it impacted on prices or rents.

In a speech at the Homebuyer Show at Excel in London (March 2nd to 4th 2007) Mr Lawrenson will also be outlining other forecasts for the best investments in the buy-to-let market.