According to an article published in the Economist, it was noted that “in the first quarter of 2018 GDP rose by just 0.1%, the slowest rate since 2012. Poor weather at the start of the year hit the construction industry but overall had only a “limited” effect on the economy, according to the national statistics office.”
However, it is important to emphasise that growth in the buy-to-let sector remains strong, particularly the realm of off-plan developments. Demand is higher than ever, and supply is still extremely limited.
The slowing in key areas of the economy, with new build property and certain areas of retail aside, has apparently led some economists to wonder whether the UK is heading for outright recession before the end of the year.
The economists who wrote the article seem to think it is quite realistic to expect GDP growth this year at a rate of 0.1% or 0.2%. With this in mind, the Bank of England Monetary Policy Commission has decided to hold the national base rate of interest at just 0.5%, still historically low, in order to keep the economy growing.
Whilst on the surface this seems like a gloomy outlook overall, property investors are one group of people who should remain positive.
Mortgage rates are some of the lowest we have seen, and two major lenders including Sainsburys have actually cut their interest rates again for BTL mortgages in order to attract new business.
Whilst the Bank looks more towards residential landlords, those investing in off-plan property can take advantage of favourable lending conditions.
More young professionals than ever are looking for rental property, pushing rental yields upwards – and the long term outlook remains strongs.
Not only this, but as the economy becomes squeezed we’re likely to see job creation and wealth creation concentrated within urban and city areas, areas which are at the heart of the UK’s rental market. Investing in city centre off-plan property now is likely to pay off in the future.
Whilst the Bank of England holding its interest rates is indeed a sign that they don’t expect big economic growth in the coming months or even years, it does spell good long term news for landlords in terms of cheap borrowing rates and higher demand for rental property.