BUY-TO-LET investors are returning to the auction room as UK house prices show signs of recovery, says an expert at a specialist lender.

Statistics show the auction market is dominated by private investors rather than people buying for their own occupation. In June, 93 per cent of purchasers bought for investment - up from 78 per cent in February. In July, the rate remained high at 86 per cent and the amount raised at property auctions was £490m, compared to £470.5m in July the previous year.

Chris Baguley, director at Auction Finance Limited, which provides finance for investors buying property at auction, says interest in buy-to-let property is rising:

"A growing number of people are seeing the benefits of investing in residential property, especially as bargains can be picked up at auction. For many investors, they're proving an alternative to savings rates which are still extremely low.

"This trend coincides with the fact that the average yield on investment property (the gross profit on capital investment) currently stands at an average of 8.5 per cent."

David Sandeman from the Essential Information Group (EIG), which tracks auctions, said:

"We're seeing increasing numbers of buy-to-let investors in the auction room and as yields begin to rise more and more investors are snapping up properties. There are still real bargains to be had and in many auction rooms up and down the country, it's standing room only. Whereas, in recent months, many people were cautious and simply observing, we're now seeing serious bidders as confidence returns, and house prices start to increase."