Earlier this week I met a Dulwich Village landlord who happens to own a few properties within the district. He mentioned he has been reading my blog for a while and would like to know my thoughts on how the recent changes to the interest rate would affect the East Dulwich property market and I would like to share these thoughts with you…
The Bank of England made the decision to cut the interest rates to 0.25% as the Bank believed Brexit could potentially direct a slower path of growth within the UK, in particular to the manufacturing and constructing industries. For the country as a whole, the manufacturing and constructing industries are still performing well below the pre-credit crunch levels of 2008/09, meaning the British economy remains vulnerable to an economic shock. East Dulwich can claim to have had some success stories in the manufacturing and construction industries, and there are a significant amount of people who are employed within these sectors. In the SE22 postcode area there are 17,024 individuals employed, 290 work within the manufacturing industry and 659 in the construction sector, meaning
1.7% of the SE22 workers are employed within the manufacturing sector and 3.9% of the SE22 workers are in construction.
Another sector the Bank of England is concerned about is the Financial Services industry, which it could be argued is more important to the East Dulwich economy. In East Dulwich, 1,391 people are employed within the Financial Services making up 8.2% of the working population.
The Bank of England also announced an increase in the quantity of money via Quantitative Easing to buy £70bn of the Government and private bonds, which on its own may not affect the East Dulwich property market. But, the other measure included in the recent announcement was £100bn of new funding to banks. The additional £100bn will allow High Street Banks to pass on the base rate cut to individuals and businesses. Therefore, banks will be able to offer more cheap money to loan for mortgages. This has much more potential to have a large effect on property prices within East Dulwich due to the £100bn being more than enough to purchase 500million properties in the whole of the United Kingdom.
Overall it will take until early in the New Year to find out the real direction of the East Dulwich real estate market, and the effects of Brexit on the economy as a whole, along with the recent interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent undersupply of housing. The severe undersupply means that East Dulwich property prices are likely to grow further in the medium to long term, even if there is a dip in the short term. This brings attention to what homeowners and landlords have been aware of for many decades, that investing in property is not a short term project, and it will remain the best form of investment due to continuous demands of people needing accommodation. In short we all need somewhere to live and we continue to build to few houses.