The report compares buy-to-let returns with long- term investment returns in separate major asset classes (including equities, gilts, commercial property and cash) during the period from Q4 1996 (the year the buy-to-let mortgage initiative was launched by the Association of Residential Letting Agents) to Q4 last year. The report’s findings show buy-to-let has outstripped all other major asset classes over the period. The table below illustrates the performance of the individual asset classrs.

£1,000 invested in an average buy-to-let property purchased with a 75 per cent loan-to-value (LTV) mortgage in the final quarter of 1996 would have grown to £14,897 by the final quarter of last year – a compound annual return of 16.2 per cent. The same investment in UK commercial property would have grown to £4,494; in gilts, to £3,329; in equities (shares), to £3,119; in cash, to £1,959. A buy-to-let purchaser buying entirely with cash would have seen each £1,000 invested grow to £5,071 by the end of last year – a compound annual return of 9.4 per cent.

The average buy-to-let investor starting with a single property and a 25 per cent deposit who prioritised mortgage repayment, using all net cash flow to reduce debt, could have paid off their mortgage in less than 13 years. By last year, they would be generating an annual net income of £6,400. These investors would have turned £1,000 into £14,517 over in 18 years.

During this period, capital gains have also been substantial; an investment of less than £16,000 (comprising deposit and purchase costs) for the mortgaged investor would have delivered £153,400 from cumulative capital gains alone by the end of last year.

Last year was a particularly good year for buy-to-let investors, with property prices rising by an average 8.3 per cent; the findings show that mortgaged landlords achieved average returns of 18.3 per cent for the year, 81.9 per cent of which was comprised of capital gains. Unmortgaged landlords achieved returns of 7.9 per cent.

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“The phenomenon of buy-to-let as an asset class only goes to underline the stable personal finances of landlords,” says John Goodall, chief executive of Landbay. “The stability of returns shown in our research underlines why this group of borrowers can be so attractive for lenders. In fact the history of buy-to-let can be viewed as a history of opportunity for those offering the financial backing to landlords.”

“However – the bigger trend underlined here is the democratisation of such investments, which started a generation ago, and is far from complete,” Goodall concludes. “Buy-to-let itself is only one example of this shift. Now new models of peer-to-peer finance can give access to the returns involved in lending to such industries. Since 1996 ordinary investors have been able to be landlords, but now in 2015, ordinary investors can play the role of the bank.”