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 Boston, 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 Boston, of the 20,194 people who have a job, 4,189 are in the manufacturing industry and 1,105 in Construction meaning
20.7% of Boston workers are employed in the manufacturing sector
5.5% of Boston workers are in construction
The other sector of the economy the Bank is worried about, and an equally important one to the Boston economy, is the Financial Services industry. Financial Services in Boston employ 208 people, making up 1% of the Boston 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 Boston 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 Boston property market.
It will take until early in the New Year to find out the real direction of the Boston 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. This is something I have spoken about many times past blogs and the specific affect on Boston. The severe under-supply means that Boston 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 are considering buying a property for investment and would like some free advice and help then please call the Boston office on 01205 352019