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According to Alliance & Leicester Mortgages, London will remain the most lucrative property investment region in the UK in 2008. Meanwhile, Scotland and the north of England are expected to see the most rapid expansion.

However, traditional homebuyers will not be the ones to benefit, research revealed. Instead, it will be the professional landlords in the buy-to-let market who gain the most. Their large portfolios make them the most financially secure, with some even able to put a portion of their rental income aside for personal use.

In fact, almost 50% of landlords who owned 20 or more properties earned enough from their rental properties to supplement their primary savings. Of the other half, nearly 40% made enough money from their property portfolios that they were able to rely on it as their main source of income.

Rental properties in central London once again proved to be the most successful. Yields in the capital city can be up to four times higher than amounts generated from properties in the south-east of England.

Alliance & Leicester’s results further predicted that Scotland would see an increase of 5% in rental yields in 2008, with the north of England close behind at 4%.

Overall, 71% of those surveyed expected good results in the new year.

Jeremy Claridge, head of specialist mortgages at Alliance & Leicester, commented on the situation: “It is encouraging that buy-to-let landlords indicate they are feeling buoyant about the outlook for 2008.

“Regardless of a tough financial year, it is clear the buy-to-let property market is still healthy for longstanding landlords, especially for those in the south-east of the country.”

Although a slowing housing market has encouraged rental growth, the demand has fallen away from flats due to oversupply, the Royal Institution of Chartered Surveyors (Rics) revealed today. 

The latest data from the Rics quarterly Letting Survey shows that the demand for houses has risen 25.2% since the last quarter, while the demand for flats has dropped by 20%.

This is good news for landlords, who are riding the wave of demand in relative comfort, with gains from rising rents offsetting the erratic market.

However, the survey also warned of some uncertainty for landlords in the future as tightening lending criteria and successive interest rate hikes begin to hit the buy-to-let market.

Meanwhile, those hoping to invest in real estate are increasingly discouraged by the lack of incentives and the unstable property market. 

Jeremy Leaf, spokesman for Rics, commented: “With rents still on the increase, many would-be buyers will find accessing the housing market even more difficult as they struggle to raise the capital for that first important purchase.”