I had an interesting chat last week with a Fordwich landlord
who owns a few properties in the city. He popped his head in to my office as
his wife was shopping in the area (and let’s be honest talking about the Canterbury
Property Market is a lot more interesting than clothes shopping!). We had never
spoken before (because he uses another agent in the city to manage his Canterbury
properties) yet after reading my blog on the Canterbury Property Market for a while,
the landlord wanted to know my thoughts on how the recent interest rate cut
would affect the Canterbury property market and I would also like to share
these thoughts with you……
Well it’s been 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 the British economy remains highly susceptible to
an economic shock. This is especially important in Canterbury, because even
though we have had a number of local success stories in manufacturing and
construction, a number of people are employed in these sectors. In Canterbury,
of the 22,210 people who have a job, 712 are in the manufacturing industry and 1,064
in Construction meaning
3.2% of Canterbury workers are employed in the Manufacturing
sector and 4.8% of Canterbury workers are in Construction
The other sector of the economy the Bank is worried about,
and an equally important one to the Canterbury economy, is the Financial
Services industry. Financial Services in Canterbury employ 391 people, making
up 1.8% of the Canterbury 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 Canterbury 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 huge effect on the Canterbury 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 find out the
real direction of the Canterbury 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 undersupply of housing (something I have spoken about
many times in my blog and the specific effect on Canterbury). The severe
undersupply means that Canterbury 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.
For more thoughts on the Canterbury Property Market, please
visit the Canterbury Property Market – www.canterburypropertyblog.com
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