What Does Rising Inflation Mean for Your Property Investment?

Last updated: 7.09pm, Thursday 2nd June 2022 by

Here, we’re going to cover exactly what’s happening with the economy and inflation and what this means for your property investment

2nd June 2022
Gordon Campbell

 

On Wednesday 23 March, the Chancellor of the Exchequer Rishi Sunak announced the Spring Budget and discussed the current state of the UK economy.

While the UK economy remains robust, there weren’t any specific announcements directly about the property market.

Many professionals in the property industry have said no news within the Spring Budget is good news.

Many are happy to see no changes announced in Capital Gains Tax and Stamp Duty Land Tax for investors.

But how will rising inflation affect the property market?

Here, we’re going to cover exactly what’s happening with the economy and inflation and what this means for UK property investment

The current inflation picture.

In the UK, inflation has increased to a 30-year high with potential for it to rise further.

Living costs, especially, energy, food and fuel prices, are rising at extraordinary rates.

This steep rise in inflation and consumer prices has led to a cost-of-living crisis. 

                            Current UK inflation rate

                        April 2022

                         9.0%

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Annual

2022

5.4%

6.1%

7.0%

9.0%

2021

0.7%

0.5%

0.7%

1.5%

2.1%

2.5%

2.0%

3.2%

3.0%

4.1%

5.1%

5.4%

2.6%

2020

1.8%

1.7%

1.5%

0.8%

0.6%

0.6%

1.1%

0.2%

0.6%

0.7%

0.4%

0.6%

0.9%

2019

1.8%

1.8%

1.9%

2.1%

2.0%

2.0%

2.0%

1.8%

1.8%

1.5%

1.4%

1.3%

1.8%

2018

3.0%

2.7%

2.4%

2.4%

2.4%

2.4%

2.5%

2.6%

2.4%

2.4%

2.3%

2.1%

2.5%

Energy

Recently, the energy price cap was raised to a record high.

This means the average home bill will rise by nearly £700 annually from April.

And further rises are expected with many believing the energy price cap to be increased again in October.

 

The Chancellor announced a package of support of £15 billion pounds to UK households of a wide range package of support that will help many lower/middle income households with the cost of living challenges.

Food Inflation

Food inflation is not just a challenge to the UK, it is an international issue and challenge as the chart below shows.

International Growth

There is a mixed picture across the world with international growth as the chart shows below.

The UK continues to be in a strong position as it starts to capitalise on life after Brexit.




Many high-income economies are suffering 40-year highs in inflation.

They all have faced the same series of major supply shocks to their economies simultaneously: reopening of the economy after the first wave of the COVID-19 pandemic in spring 2021, global supply chain disruptions for critical goods throughout the last 18 months, and energy and food price shocks caused by Russia's invasion of Ukraine in February 2022.

Property investment during times of high inflation

Some landlords may be worried about rising inflation and how it will impact their profitability.

Naturally, soaring energy bills are a worry for homeowners, investors and tenants alike. 

During times of high inflation, investing your money in property can prove to be a better form of investment, especially when investing with a long-term frame of mind.

Property remains one of the best assets providing strong returns.

While rising inflation can impact immediate profitability, professional investors rarely take a short-term outlook.

Additionally, the property market has remained remarkably resilient throughout recent political and economic uncertainty.

There is an ongoing housing shortage, which makes UK property investment a strong choice for investors.

This supply and demand in-balance means landlords who invest in the right areas could see strong demand from tenants, while also seeing the value of their property increase over time.

This makes bricks and mortar one of the most impressive investments around.

Looking at other ways to invest your money, the majority of saving accounts still have bog-standard interest rates.

And the stock market and crypto is extremely tumultuous with the current economic uncertainty.

While you could get lucky and invest in stocks on the rise, you could be much worse off if you make the wrong decision. 

This further highlight why property investment can be a far better form of investment during times of high inflation.

And with inflation expected to remain high for some time, it may be the right time to consider property investment.

If you are interested in property investment and have not yet had an opportunity to meet or speak to us, please get in touch and we would delighted to help you as we have done for over 1000 international investors in the last 7 years.

Thank you for reading

Alliance Property Group. Making A Difference