Buy-to-let investment in the UK is set to go from strength to strength in 2008, it has been suggested by one industry commentator.

Malcolm Harrison from the Association of Residential Letting Agents (Arla) has claimed that this year could be yet another healthy one in terms of returns for landlords.

He highlighted two "important factors" that lead him to believe that landlords are set to continue enjoying strong returns.

Rental demand is increasing all the time, according to Mr Harrison, who said the reasons behind this trend are "demographic". These factors include things such as more flexible working, increasing migration and rising divorce rates, which lead to more single households being created.

Another factor highlighted by the Arla spokesperson is the fact that house prices - after an extended period of sharp rises - are softening.

"Traditionally, every time you have house price softening you get increased rental demand," Mr Harrison said.

His comments come after statistics by Birmingham Midshires showed buy-to-let investors enjoyed returns of 16.3 per cent in the 12 months leading up to December 2007. This was up from the 13.5 per cent they typically received in 2006.

Last year also saw the typical buy-to-let property price rise by 10.9 per cent to reach an average price tag of £154,795. And Mr Harrison believes that this price will edge upwards.

"You can't really divorce the buy-to-let market from the private rental sector and you can't divorce the private rental sector from the overall housing market," he explained. "They are all one and the same; the only difference is in the tenure."

Meanwhile, according to the National Housing and Planning Advice Unit, the UK's buy-to-let sector has not played a significant part in housing inflation witnessed during recent years.

Research by the unit shows higher incomes, household growth, low and stable interest rates and limited supply were all factors that had a far more significant impact on house price inflation.

Buy-to-let has often been blamed for the fact that first-time buyers are struggling to get a foothold on the property ladder, but Mr Harrison does not share this view, describing the standpoint as "a load of rubbish".

He explains: "The buy-to-let investor tends to go into the middle market; and buy-to-let, until very recently, has done no more than refinance big chunks of the private rental sector and only in the last year or so has actually helped to grow the private rental sector."

First-time buyers' affordability troubles were highlighted again today by Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics).

He was commenting on new figures by the British Bankers' Association, which showed record levels of remortgaging activity in January. Overall, 49 per cent of all mortgage approvals were for remortgaging purposes.

Mr Rubinsohn said: "While first-time buyers may be struggling to find finance to get a foot on the residential ladder, there are increasing opportunities to refinance for those who already own property."

He commented that this trends shows there is "greater willingness" among lenders to pass on interest rate cuts to people who already own homes.

"It does however throw into sharp relief the claim that a weaker housing market will necessarily be good news for first-time buyers," the Rics chief economist concluded.

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