Contact us:
01508 493330

Latest News & Updates

← Back to News

Posted on September 28th 2015 by admin-movingin

ARLA rejects Bank of England claim that landlords will quit if house prices drop

ARLA has rejected Bank of England suggestions that buy-to-let landlords would quit the market if house prices drop.

But ARLA has warned that a rise in interest rates could spark a sizeable exit of landlords.

On Friday, the Bank expressed concerns that buy-to-let could threaten financial stability by amplifying a housing boom or bust.

It said that landlords were much more likely than owner-occupiers to sell up if there was a significant drop in house prices, causing property values to fall further.

But the Bank also warned that an upswing in the market could mean an increase in buy-to-let activity, adding further pressure to house prices.

The Financial Stability Committee said: “This could prompt owner-occupier buyers to take on even larger loans, thereby increasing overall risks to financial stability.”

David Cox, managing director of ARLA, said: “The suggestion is that buy-to-let landlords are likely to sell their properties if house prices drop significantly – but this is an unlikely reaction.

“Buy-to-let landlords range from professional landlords, who make their incomes on their properties, to those who may own just one property and will be taking a long-term view of capital appreciation, and so will hold on to it should prices fall.

“As long as rents are still covering the costs of buy-to-let properties, we don’t see landlords exiting the market in droves.

“However, what we might see is landlords struggling when mortgage interest rates rise – whenever this may be.

“As they fall into financial difficulty, many may be forced out of the market.”

http://www.propertyindustryeye.com/arla-rejects-bank-of-england-claim-that-landlords-will-quit-if-house-prices-drop/