6th February 2017

INFLATION NOT BREXIT

I was interested to read a comment from former RICS Residential Chairman, Jeremy Leith, advising that inflation has taken over from Brexit as the biggest threat to affordability and confidence in the housing market.  I was also listening to an item on the radio after the inflation announcement, advising that in normal economic times with inflation rising and the value of the pound weakening, the first lever that would be manipulated would be an increase in interest rates.  It will be interesting to see what announcements, if any, there are from the Governor of the Bank of England in relation to potential interest rate increase.  I await further meetings of the MPC with interest.

I think that a rise in interest rates at this stage would be very damaging to the economy in general, and the housing market in particular, as despite positive growth figures, I am still concerned about the sustainability of the economic recovery and foundations upon which it is being built.

Whilst I am of the view that any uncertainty is bad for the economy and therefore bad for the housing market and that Brexit is therefore having an impact, I do think that here in Scotland there is more damage caused by talk of ‘INDY2’.  I will no doubt be reporting further on this in the weeks and months to come.

Lindsay Darroch
Partner – Head of Property 
@LindsayDarroch
www.blackadders.co.uk

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