Interest Rates Remain Unchanged
So the Bank of England decided to keep interest rates at the record low of 0.1%, despite many people believing that they would increase it to curb the rising inflation.
We all know that the interest rates being at an all time low has spurred the property market to record highs over the years.
Many experts expected rates to increase however, they left them at record lows. In turn, observers are lobbying for the BoE to not be allowed to make statements prior to rate decisions, as it causes many ripples across a number of industries.
Since this announcement, inflation has increased again, this time to over 4% this could mean that a December increase is more likely. This shouldn’t have a too dramatic effect on the property market though.
Savills have recently come out to say that they expect a steady 3.5% growth in 2022 with a 13% growth in the next 5 years. Leading the way is still the North-West with a climb of 18.8% making the North-West still the place to to put your money.
Our View
We feel that interest rates will remain at the 0.1% leading into 2022 despite the review before the end of the year.
Interest rates will most definitely rise in by early 2022 to combat the inflation rate rises. We feel that by the middle of 2022 we can expect interest rates to hit 0.5% with us hitting the 1% in early 2023.
What does this mean for the property market…
We feel that the market will slow down slightly and start to level out and grow at a more modest rate. London will continue to grow at a comfortable 2% whilst the North-West in areas such as Manchester, Liverpool, etc we can still expect to see growth around the 4% mark. The reality is, the market has stood greater interest rates than where they are set to go today. We only have to go back to 2007 to see rates as high as 5.75%.
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The Rental Market Boom
The rental demand is at its strongest level since 2013 with a property taking an average of only 15 days to let.
The biggest increase is in city centres where we have seen the demand double in the major cities due to people getting back into the offices and wanting to save on commute time along with the younger demographic wanting to get back in amongst all the action.
The graph below shows that in all of the major cities the rental demand is in the inner city centre compared to the outskirts which is the reverse of what we were seeing pre COVID.
Our View
City centres are BACK!!
If you regularly read our newsletters and listen to our webinars you will know that we have said from the very start that city centres would bounce back as things start to open back up.
We are now witnessing all of the pent up demand from the younger demographic wanting to get back into the city’s centres as we approach the festive season.
We feel that the simple lack of supply will continue to push the rental market up well into next year. For some perspective of this demand for city centre apartments, we have just let over 60 apartments in the last 6-8 weeks.
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