Buy-to-let arrears set to escalate as interest-only arrangements end

A squeeze in the number of buy-to-let properties available in the Irish property market is likely to happen as many interest-only arrangements end and borrowers become liable for substantially higher repayments, the Institute of Professional Auctioneers and Valuers (IPAV) has warned.

In a submission to the Department of Housing, the group's chief executive, Pat Davitt, said many investors are now reaching the end of their 10-year interest-only period and will become liable for capital repayments in addition to interest.

“For many of these landlords the unsustainability of their position will become evident and many will be forced out of the market with the loss of such properties to the rental market, unless a solution is found,” he said.

“This issue requires an immediate solution if the existing stock of properties is to be retained within the sector.”

In its submission, IPAV proposed equalising the treatment of residential property lettings as a normal business for tax purposes akin to the commercial property sector.

It also called for the introduction of tax incentives for landlords who agree to long-term tenancies of five, seven, 10 and 15 years, greater than currently provided for in the so-called Part 4 tenancies under the Residential Tenancies Act 2004.

The institute proposes extending the equivalent of the rent-a-room tax-free allowance of €14,000 a year to all residential landlords to encourage them to stay in the business or to expand.

The group says there is a serious problem with the social housing situation. “The number of people on the local authority housing list and the trend in the list is suggestive of market failure that warrants more proactive Government intervention,” the submission says.