I had an interesting chat with a Trinity landlord who owns a few
properties in the town. He popped his head in to my office as his wife was
shopping, we had not spoken before (because he uses
another agent to manage his Edinburgh properties) yet after reading my blog on
the Edinburgh Property Market for a while, the landlord wanted to know my
thoughts on how the recent interest rate cut would affect the Edinburgh
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 Financial Services and Construction
industries. You see for the country as a whole, the Financial Services 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 Edinburgh because, even though we have
had a number of local success stories in Financial Services and Construction, a
large number of people are employed in these sectors. In Edinburgh, of the 227,978
people who have a job, 25,306 are in the Financial Services industry and 10,715
in Construction meaning …
11.1% of Edinburgh
workers are employed in the Financial Services sector and 4.7% of Edinburgh
workers are in Construction
The other sector of the economy the Bank is worried
about, and an equally important one to the Edinburgh economy, is the Manufacturing
industry. Manufacturing in Edinburgh employs 7,979 people, making up 3.5% of
the Edinburgh 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 Edinburgh 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 Street 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 Edinburgh 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 Edinburgh 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 Edinburgh). The severe undersupply
means that Edinburgh 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 propeties being built.
A few more interesting articles about the
Edinburgh property market:
- 274% increase in 20 years in Edinburgh – interesting, very interesting http://bit.ly/2cqRvLU
- Edinburgh Buy to Let sees returns of 9.3% in the last year http://bit.ly/2cf5W36
- To buy or sell in the Edinburgh property market? That is the question http://bit.ly/2cBuKHb
- Values of Edinburgh flats smash through the £285/sq ft barrier http://bit.ly/2coIaXx
- Post Brexit property disaster - more like a ‘soft landing’ so far Nationwide claims http://bit.ly/2bW4zYB
- Capital growth AND rental yields are higher outside Edinburgh! Time for an investment re-think? http://bit.ly/2bi6g1n
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