I had an interesting chat with a landlord from the Boreham Road area who owns a few
properties in the town. He popped his head in to my office as his wife was
shopping in the area (and let’s be honest talking about the Warminster Property
Market is a lot more interesting than clothes shopping!). We had never spoken
before (because he uses another agent in the town to manage his Warminster
properties) yet after reading my blog on the Warminster Property Market for
awhile, the landlord wanted to know my thoughts on how the recent interest rate
cut would affect the Warminster 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 Warminster,
because even though we have had a number of local success stories in
manufacturing and construction, a large number of people are employed in these
sectors. In Warminster, of the 8,622 people who have a job, 730 are in the manufacturing
industry and 616 in Construction meaning
8.5% of Warminster
workers are employed in the Manufacturing
sector
and 7.1% of Warminster workers are in Construction
The other sector of the economy the Bank
is worried about, and an equally important one to the Warminster economy, is
the Financial Services industry. Financial Services in Warminster employ 147
people, making up 1.7% of the Warminster 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 Warminster
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 Warminster 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 Warminster 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
affect on Warminster). The severe undersupply means that Warminster 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.
