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 Loughborough,
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 Loughborough, of the 25,170 people who have a job, 3,281 are in the
manufacturing industry and 1,442 in construction meaning
13% of Loughborough
workers are employed in the Manufacturing
sector and 5.7% of Loughborough
workers are in Construction
The other sector of the economy the Bank is worried
about, and an equally important one to the Loughborough economy, is the
Financial Services industry. Financial Services in Loughborough employ 454
people, making up 1.8% of the Loughborough 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 Loughborough 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 Loughborough 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 Loughborough 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 Loughborough). The severe
undersupply means that Loughborough 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.
If you would like to discuss the Loughborough property market or chat about any potential investment please feel free to call me on 01509 260777 or email me james.loughborough@belvoir.co.uk
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