FOR some time we have been reporting that there were signs of a general improvement in the economy which was filtering through from manufacturing and is starting to have an effect on the local economy overall. The announcement by the Bank of England to keep interest rates fixed for up to three years, has added that extra bit of confidence, such that for the first time in a long time, it is possible to see further than six months ahead and that the general economic situation should improve.
From speaking to local manufacturing, distribution and service industries, there definitely seems to be an air of business confidence which started at the beginning of this year and is now gathering pace. The effect of this is that commercial property demand should increase, but until companies see higher levels of turnover and profitability, it is unlikely that rents and capital values will increase in the short term.
The reports that have come through on the housing market this month, both from the Office of National Statistics and the Royal Institute of Chartered Surveyors, are showing that there are now positive signs that the housing market is improving.
One does, however, need to analyse the details of this carefully, in that the increase in prices is very regional and mostly in the South East of England, whereas in the Midlands, in particular Worcestershire and Shropshire, property is selling, providing asking prices are realistic and, as yet, there is no real sign of sale prices increasing. To have movement in house sales is good. For over forty years people have been encouraged to purchase and improve their own property. During the recession, sales fell to an all-time low, which must have also impacted on the economy. When houses sell, retailing improves; the one is reliant on the other, and to have a healthy housing market is good for retailing and manufacturing, so long as house prices remain affordable.
The Buy-to-Let market is also likely to improve, as the prospect of higher interest rates for savers seems unlikely, whereas returns higher than Bank interest rates can be achieved with Buy-to-Let. Those thinking of entering the Buy-to-Let market must, however, take proper professional advice.
It does make a change to be able to look at the whole market in a positive light, as for months it has been necessary to dissect the good bits of the property market from the bad, whereas this month it is possible to see a more rounded, balanced market, which still has scope for further improvement, but long term investment in property now seems set to return.
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