Explain this:

According to insurance company AXA, as the housing market focuses on mortgage arrears and repossessions, evidence has emerged to suggest the private rental market could be heading for a bumpy ride. And yet, according to Paragon Mortgages, the average property purchased 12 months ago has generated an overall return of 9.3 per cent for buy-to-let landlords, taking account of both capital gain and rental income.

So, on the one hand, we have AXA warning that buy-to-let landlords are set to feel the pinch. On the other hand, Paragon seems as bullish as ever.

According to AXA: “The number of private renters slipping into arrears because they simply can’t afford the rent is rising. In fact, 13 per cent of renters have gone into arrears in the past 12 months, with over half of these (7 per cent) doing so in the past three months alone. On top of this, over 50 per cent are increasingly concerned about being able to afford their rent going forward.”

Mike Keating, Managing Director of Personal Lines Intermediary at AXA says: “Our research shows that over a third of people privately renting are doing so because they can’t get a mortgage at the moment. On the surface of it, this looks like the rental market should be buoyant. But if you consider that many of those renting may be struggling to make ends meet it’s certainly not all good news for buy-to-let owners.

“The cost of living is rising rapidly and average earnings are not keeping pace. And while rental rates appear to have dropped marginally in the last few months*** it’s going to continue to be tough for many tenants.”

Every month, as regular as clockwork, buy-to-let mortgage specialist Paragon sends out a press release telling us all how strong the buy-to-let sector is. Yields were stable at 6.4 per cent for the second consecutive month. Yields hit a two-year high of 6.4 per cent in May, having risen consistently throughout 2008. And then the headline: “rent rise 9.3 per cent in a year.”

It is difficult to square the findings of the Paragon and Axa reports. But then you know what they say about lies, damned lies and statistics.

But the AXA report does appear to show up the lie that the current property market turmoil is solely down to the credit crunch.

How are buy-to-let landlords being affected by the credit crunch? They are being affected by the high cost of oil, the high cost of food, and by the general climate of rising costs. These factors were not caused by the credit crunch; if anything, they helped cause the credit crunch.

The truth is, people can not pay more than they can afford. How can rent on property rise as an economy heads into recession? This is surely absurd.

The credit crunch is just a manifestation of deeper forces at work. House prices went too high, our borrowing rose too much, demand for consumer goods was too high, we consumed too much oil. The credit crunch is just one of several consequences of this.