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



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.

Jumps in repossessions trigger house price falls

Forced sales, when homeowners have to accept discounts to sell fast, are one of the biggest drivers of house price falls. These are caused when people are no longer able to keep up with mortgage repayments, for example after losing their job.

The Centre for Economics and Business Research, a consultancy, has forecast that mortgage repossession claims will surge by 50pc by the end of this year. Over the next two years, they will jump 150pc; by 2024 it will be at the highest level since 2014, when the numbers were still inflated in the wake of the financial crisis.



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