Buy-to-let sales could sink market

AN ARMY of amateur buy-to-let landlords all trying to sell at the top of the market will tip Britain into a devastating collapse in house prices, claims one of the most bearish reports on the housing market ever to come out of the City.

House prices will fall by 30%, according to the report by investment bank Durlacher, with some collapsing by 45%. Some financial institutions like Bradford & Bingley, which has aggressively bankrolled the buy-to-let boom and self-certified mortgages, may not survive.

The bursting bubble will also trigger fresh scandals as the financial services industry is accused of mis-selling self-cert mortgages and mortgage protection products. Durlacher analyst David Pannell said: ?Our pessimism is based on international and historic experience. The UK housing market has never experienced a soft landing.'

More homes will be bought this year by buy-to-let landlords than by first-time buyers, creating an army of amateur landlords who can sell easily as alternative asset classes become more attractive. The correction would occur even if unemployment and interest rates remain at their current low levels, according to Pannell.

The downturn would be sharper and shorter than the five-year decline from 1988. Pannell's grisly analysis contrasts with the conventional wisdom that the boom will end benignly.

Durlacher recommended investors sell B&B, Countrywide, Friends Provident, Kensington and Paragon.