The private landlord sector could now be in near-terminal decline, the head of Firstrung has claimed.
People should not make the mistake of assuming that property is always a good investment, a top industry expert warned today.
Paul Holmes, chief executive at first-time buyer specialists Firstrung, said that the recent popularity of buy to let investments - which sees a private landlord purchase property to derive rental income from it - has backfired with the current economic downturn. This is because buy to let entrepreneurs are particularly vulnerable to falling house prices, as they tend to borrow larger mortgages and hold several properties at a time.
Therefore, this form of investment has become markedly less popular with the credit crunch and the subsequent falls in house prices. Many landlords have fallen in to negative equity, where the value of their property is exceeded by the value of its mortgage - and are therefore facing financial ruin.
The comments come in the wake of latest house price data from Nationwide, which today shows a 10.5 percent decline in the value of UK homes over the past 12 months. Perhaps as a response to negative equity concerns, just two percent of buy to let entrepreneurs are currently planning to sell up, according to recent research from the Royal Institution of Chartered Surveyors.
Mr Holmes commented: "Buy to let is a relatively new phenomenon. It really only caught people's imagination three or four years ago and as we're watching now that illusory profit can be wiped off very quickly…[buy to let is] going to die."
He added: "People have to stop thinking of property as a sexy investment where they can make money by doing nothing and start to think as somewhere to live - not a buy to let portfolio."
