Analyst Warns of 'Potential Housing Market Crash'

By: Submissions

A financial industry expert has warned of a 'potential crash' in the property market.

F&C Investments' Ted Scott believes a negative yield on property could lead to buy-to-let investors selling their homes as they can no longer cover costs - which would precipitate a housing market crash.

This scenario will be made more likely should the Bank of England's monetary policy committee (MPC) choose to increase rates to 5.75 per cent in the near future - as has been predicted.

Indeed, Mr Scott suggests that Mervyn King, the bank's governor, would have done better to raise the rate of interest to the aforementioned level this month.

"A 50 basis point increase would have shown consumers that Mervyn King and the MPC mean business and that they are serious about nipping the problem of inflation in the bud," he explained.

"However, with a negative yield on property, which is likely to fall yet further, the buy-to-let segment of the property market is looking increasingly fragile and those investors unable to generate a yield from rent could be forced to sell.

"This poses the threat of a potential crash in the housing market."

Property market expert Julian King from National Homebuyers agrees.

"This is the beginning of the end of property price confidence," he said.

"The increase in enquiries we are receiving from buy-to-let mortgages is unprecedented.

"Many are experiencing a negative yield already and with today's hike in interest rates, we predict a deluge of buy-to-let investors needing to sell their home quickly.

"As landlords are increasingly less able to cover their costs and the buy-to-let market becoming less and less profitable this will add to the precipitation of a housing market crash without any shadow of a doubt."

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