Property and Inflation
There has been a lot of uncertainty over the past two years, with the UK’s economy being rocked by Brexit and the Covid-19 pandemic.
This has seen inflation rising throughout the country as the cost of living goes up. The Office of National Statistics states that the CPIH, the most comprehensive measure of inflation, is up 8.9% from this time last year.
Naturally, many investors are questioning if now is a good time to expand or begin their portfolios.
However, property investment is one of the safest ways to invest, and investing during a period of inflation can actually be the best option for many reasons. The UK housing market is famous for its stability.
In this guide, we will explain how property investment is affected during inflation and why you should still consider it as your next investment.
How Is Property Investment Affected By Inflation?
Whilst many sectors are being affected negatively by the rising cost of living, property investment is one of the few where you do not need to be afraid of inflation.
There is currently an incredibly high demand for rental property that the market is struggling to keep up with. With the rise of remote working, people want more space to work from home and don’t need to stick to the cities to do so.
This has led to more demand for high-quality rental properties around the UK. The BBC has found that, on average, letting agents have halved the number of available rental units on their books in the past year.
Rental prices have soared over the past two years due to this shortage, as investors are able to make the most of the current market conditions. We estimate ⅓ of landlords are looking to expand their portfolios due to this.
In the past year alone, rental prices have risen by 11.8%, according to Savills. There is further growth expected, as the five-year forecast for the UK sees an average growth of 19.9%. This is the fastest growth in 16 years.
In addition to the attraction of rising rental prices, the value of properties is also growing. Across the UK, there is an expected increase in value of 12.9% over the next five years. This means any property you invest in will be worth more over time.
What Does This Mean For Me?
In simple terms, this means now is a great time to consider property investment.
Unlike other investment options such as cryptocurrency or stocks, there is little chance of the housing market experiencing instability. This means property investment during inflation is a safer option than you might think.
In addition, investing now puts you in prime position to make the most of the increasing rental prices expected across the UK. In some areas of the UK, rent is expected to rise by at least 3% this year alone.
The appetite for rental properties is unlikely to slow down due to the lack of properties on the market, meaning there will be lots of opportunities for investment over the next few years.
These top investment locations will become very desirable, meaning investing in them now is your best chance to get a good return on your investment.
You can also use a buy-to-let mortgage to help spread the cost of investing or use a payment plan where you put down a deposit to initially secure the property.
So, Should You Invest? Here’s What You Should Know
- The property market is more stable during inflation than riskier opportunities like cryptocurrency.
- Rental yields are rising at a record-breaking rate and will likely continue to do so.
- There is more demand for rental properties than is currently available.
- Landlords are looking to expand their portfolios to make the most of the current market climate.
- Property value is set to increase, meaning it will be more expensive to invest later than it will now.
If you have any concerns about property investment or inflation, please get in touch.
Our team here at RWInvest are more than happy to answer any questions you may have.
We have recently launched a brand new development in the heart of Liverpool, Central Park, with some of the best investment opportunities in the UK if you are interested in investing in property.