In response to the news that the Bank of England is to raise interest rates to 0.5%, Walter Boettcher, chief economist at Colliers International outlines the implications for the commercial property sector:
“A lift of base rate from the emergency Brexit level back to the financial crisis level, was expected by many. The rise looks to have been priced in already and so is unlikely to evoke much of a response from the property market. The sterling may rise marginally, but it will not be enough to eliminate the currency arbitrage that is attracting foreign investors to UK assets.
“The real story is less to do with an interest rate rise and more to do with fiscal policy, specifically the Autumn Budget. The Monetary Policy Committee has clearly handed the economic stimulus baton on to the Treasury. Press leaks suggest that fiscal targets may slip to accommodate spending. Don’t look for policies aimed at commercial property specifically, aside from ratcheting up infrastructure and regional development spending. Look for highly politicised policies aimed at residential construction and affordability for first time buyers. The Chancellor will probably not do more to dampen the London residential market. It looks pretty wet already! However, further heavy handed policies may be put forward for purely political and revenue raising reasons.”
Walter is available for further comment regarding interest rates and the Autumn budget. Please get in touch.