9th May 2022
Fruition Properties, CEO, Mani Khiroya was interviewed last week by Ed Conway, Economics Editor for Sky News to discuss how rising energy costs and the recent Bank of England base rate rise is affecting the construction industry.
Talking on site at our river side development at Corney Reach Way in Chiswick, Mani explained that despite supply chain issues, rising energy costs, which have affected the price of many of the raw materials used in construction, and now an interest rate hike he still believed the housing market to be resilient, especially in London. After a surge in demand for larger properties in less crowded places there is now a renewed interest in urban living with activity in London picking up since the vaccine rollout, with the re-opening of offices, hospitality and culture and now the return of overseas buyers.
“Although increasing household costs and reduced affordability will only be magnified by the hike, interest rates are coming from a very low base historically and people will want to secure a mortgage deal now in case of further interest rate rises but also post Covid household balance sheets are robust with a greater willingness to spend on living arrangements”, he explained. “People are still working remotely meaning a greater need for home office space and larger gardens so this strength in demand combined with housing supply constraints, due to bottle necks in supply chains and planning delays, means the delivery of much needed new homes remains inadequate”.
Mani added, “I would expect the interest rate increase to slow the market and put a brake on price growth and transaction numbers, however I don’t anticipate a housing market crash. Mortgages are still relatively cheap, employment is high, and post Lehman’s, borrowing has been stress -tested and therefore foreclosures are less likely. It’s worth remembering that ¾ of all borrowers are on a fixed rate and won’t be affected in the near term. Looking at interest rate forecasts, the expectation of financial markets is that the base rate will rise until the end of the year and subsequently flatten or decline”.
A short clip of the interview is available here.