What will the 0.25% Interest Rate do to the Basingstoke Property Market?

I had an interesting chat with an Old Basing landlord who owns a few properties in the town. He popped his head into 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 Basingstoke properties), yet after reading my blog on the Basingstoke Property Market for a while, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Basingstoke property market and I would also like to share these thoughts with you.

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. 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 Basingstoke, 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 Basingstoke, of the 58,679 people who have a job, 5,402 are in the manufacturing industry and 4,278 in Construction meaning

 9.2% of Basingstoke workers are employed in the Manufacturing

sector and 7.3% of Basingstoke workers are in Construction

 

The other sector of the economy the Bank is worried about, and an equally important one to the Basingstoke economy, is the Financial Services industry. Financial Services in Basingstoke employ 3,153 people, making up 5.4% of the Basingstoke working population.

Together with a cut in interest rates, the Bank also announced an increase in the quantity of money via a new phase of Quantitative Easing to buy £70bn of Government and Private bonds. Now that won’t do much to the Basingstoke 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. This will have a huge effect on the Basingstoke 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 Basingstoke property market and the effects of Brexit on the economy as a whole, as well as 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 Basingstoke). The severe undersupply means that Basingstoke property prices are likely to increase further in the medium to long term, even if there is a slowdown 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.