Recently I had an interesting chat with
a landlord from Chertsey Lane who owns a few properties in the town. He
popped his head in to my office as his wife was shopping in the area.
We had never spoken before (because he uses another agent in the town
to manage his Staines properties) yet after reading my blog on the
Staines Property Market for awhile, he wanted to know my thoughts
on how the recent interest rate cut would affect the Staines property
market and I would also like to share these thoughts with you……
Well it’s been quite a few weeks
now since interest rates were cut to 0.25% by the Bank of England as
the Bank believed Brexit could lead to a materially lower path of growth
for the UK, especially for the manufacturing and construction
industries. You see for the country as a whole, the manufacturing and
construction industries are still performing well below the pre credit
crunch levels of 2008/09, so in the Bank's view, the economy remains
susceptible to an economic shock. This holds true in Staines too, with
a number of local success stories in manufacturing and construction,
a considerable number of people are employed in these sectors. In
Staines, of the 13,757 people who have a job, 708 are in the
manufacturing industry and 991 in construction meaning
5.1% of Staines workers are
employed in the Manufacturing sector and 7.2% are in Constructio
The other sector of the economy the
Bank is worried about, and an equally important one to the Staines
economy, is the Financial Services industry. Financial Services in
Staines employ 558 people, making up 4.1% of the Staines working
population.
Together with a cut in interest rates,
the Bank also announced an increase in the quantity of money via a new
programme of Quantitative Easing to buy £70bn of Government and Private
bonds. Now that won’t do much to the Staines property market directly,
but another measure also included in the recent announcement was £100bn
of new funding to banks. This extra £100bn will help the High St banks
pass on the base rate cut to people and businesses, meaning the banks
will have lots of cheap money to lend for mortgages .. which will have
a significant effect on the Staines property market (as that
£100bn would be enough to buy half a million homes in the UK).
It will take until early in the New
Year to establish the real direction of the Staines property market and
the effects of Brexit on the economy as a whole, the subsequent recent
interest rate cuts and the availability of cheap mortgages. However,
something bigger than Brexit and interest rates is the inherent under supply of housing (something I have spoken about many times in my
blog and its specific effect on Staines). The severe under supply means
that Staines property prices are likely to increase further in the
medium to long term, even if there is a dip in the short term. This
only confirms what every homeowner and landlord has known for decades
.. investing in property is a long term project and as an investment
vehicle, it will continue to outstrip other forms of investment due to
the high demand for a roof over people’s heads and the low supply of
new properties being built.
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