How a recession will hit house prices and buy-to-let landlords

The Telegraph have run a piece on property investors who have chased high yields are most at risk as the cost of living crisis bites   It can be seen here (registration might be required),

It says that

Soaring inflation is hitting real take-home pay just as rising mortgage costs are depleting buyers’ borrowing power and the cost of living crisis is destroying their ability to save.

Consumer confidence has plunged to a record low, meaning buyers will become nervous of taking on more debt and stretching themselves financially to purchase homes.

Neal Hudson, of BuiltPlace analysts, said: “It is renters I am most worried about. They were the worst hit by the pandemic, they are worst hit by the cost of living crisis, and they spend a higher proportion of their income on their housing costs. We will see the impact in the rental sector first, before the owner occupier market.”

If a large number of tenants fall into arrears, there could be a wave of forced sales from landlords, said Mr Hudson. “They are already feeling quite under pressure. A lot of them are reliant on debt; they are being squeezed by higher mortgage rates and by growing regulatory pressures.”

Landlords catering to lower income tenants will be most exposed, said Mr Hudson. Many of these places are also the areas in the North and Midlands that have seen huge buy-to-let investment over the last five to 10 years because low house prices have meant investors can achieve much higher yields than in London and the South.

“On paper, the yields in these places might look good, but when they factor in void periods and non-payments things will be pretty precarious,” said Mr Hudson.

 

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