What the Bank of England’s interest cut means for Asian investors
What the Bank of England’s interest cut means for Asian investors
The Bank of England has sledgehammered interest rate to levels unseen in 322 years
To stymy the spectre of a recession after the UK’s Brexit referendum, the Bank of England (BoE) yesterday announced it will be cutting interest rates to a historic low.
The central bank “sledgehammered,” to borrow chief economist Andy Haldane’s words last month, the interest rate to a measly 0.25 percent, a rate never seen since the BoE was founded in 1694.
Naomi Heaton, CEO of residential property advisor London Central Portfolio, called the cut a “premature” move. The cut’s effect on the British property market would vary depending on location, with a fleetingly positive impact on credit-dependent markets.
“In Prime Central London, which is predominantly an international market where investors are not generally reliant on credit, the picture is different and the cut is unlikely to have any notable impact,” Heaton said, adding that, post-Brexit, vendors can even be seen to be hiking up their prices.
Taking advantage of a devalued sterling, Asian investors have recently zeroed in on London and other British markets. Last month, Chinese property giant Dalian Wanda Group obtained a facility to build two skyscrapers in London’s Nine Elms area.
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In locations where property capital values could drop, the availability of products with high loan-to-value ratios may be impacted. In hindsight, banks tend to add margins after the BoE slashes base rates, Heaton pointed out, a move which could affect borrowing rates for new domestic buyers or those looking to remortgage.
“Many borrowers may see the move as headline ‘good’ news. However, a response by the banks, similar to that seen during the Credit Crunch, could have a particularly negative impact on domestic borrowers in areas such as Greater London and the rest of the UK,” said Heaton.
Property capital values seem to be not the only ones dwindling in post-Brexit Britain. Apparently, the country has become the cheapest marketplace for luxury commodities now.
“A weak British pound will boost travel inflows to the UK, helping British luxury goods players like Burberry, Mulberry and Jimmy Choo,” Luca Solca, the head of luxury goods at Exane BNP Paribas, explained to Business of Fashion.
Recently, the Knight Frank Luxury Investment Index, which tracks the price growth of 10 luxury investment sectors, recorded its lowest annual increase since the first quarter of 2010.
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Source: Property Report