UK inflation falls under double digits for first time in 10 months. What does this mean?
May 26, 2023
UK inflation falls under double digits for first time in 10 months. What does this mean?
UK annual inflation slid to 8.7% from April to April – the first time it’s dropped below double figures in eight months. It stood at 10.1% in March. The fall has been attributed to a drop in the wholesale gas price after the war on Ukraine rocked energy markets last spring. UK gas and electricity prices are expected to drop further from July, easing cost of living pressures.
The Bank of England will now decide whether or not to raise interest rates further above the current base rate of 4.5% at their next review on 22nd June.
What does lowering inflation mean for UK property investors?
Financing costs: Lower inflation often leads to lower interest rates – or the expectation of lower interest rates which can boost transactions and therefore capital values.
Stable rental income: With stable rental income comes a reduction in the enormous rent increases that have been common over the last 2-3 years. It also allows tenants to save income to buy their own property so boosting the first rung of the UK property market and making it easier for buy to let landlords to exit.
Property prices: Lower inflation generally means more savings in the bank for property buyers leading to more transactions and an increasing market price.
Sentiment: Lower inflation can influence market conditions and investor sentiment. It may contribute to a more stable and balanced real estate market; presenting investors with increased positive market sentiment leading to more people buying.
Forecasts
A recent forecast from Pantheon Macroeconomics showed CPI inflation stabilizing this month (as it has done), slowing to 7.3% in June and hitting 3.3% in December. Taking office, Rishi Sunak aimed to half inflation before the end of his first year in office.
Indeed, the UK housing market is showing positive signs of increased consumer activity, the monthly increase in prices between April to May at 1.8% the biggest increase of the year so far, “significantly higher than the historic average May rise of 1.0%” (Rightmove). Average mortgage rates are also remaining steady, despite Bank of England rate increases – a sign of strength in the UK housing market.
FEATURED PROPERTY
Goldstone Apartments
From £370,000
Yields of up to 14%
Just 20% now
The Goldstone Apartments is part of the exciting regeneration of a dynamic new residential neighbourhood in Hove. Minutes from Hove station, Hove Park and the beach, with Brighton on the doorstep and London just over an hour away, it offers enviable access to an amazing array of amenities for those who choose to make their home here.
ELLIOT ROWE PARTNER
about the AUTHOR
Elliot is the Associate Director (UAE) of RPA Group. Sixteen years of experience in the UK Real Estate Industry working in the UK and the Middle East. He's been advising clients on how to develop leading portfolios to achieve client goals and personal targets.