As of May 2022, inflation is at a four-decade high of 9.1%, with the Bank of England warning it’s “uncomfortably high” – and it’s expected to continue to rise.
In our latest video – filmed in May, therefore stated inflation figures are not up-to-date – Dan Smith (Head of Investor Relations) speaks to Simon Lenney (Chairman) about what soaring inflation means for investors, and why the UK housing market continues to be an attractive potential addition to a portfolio amidst the current investment landscape.
Discussing the current, four-decade high rate of inflation, Simon explains:
"The issue that we’re faced with with such a high inflationary rate compared with other market factors is that the disparity between investors’ returns – which are still relatively low on cash investments and with interest rates generally – aren’t keeping up with the rate of inflation."
“Right now if you were going to save cash in a ‘high interest’ savings account, at the moment you’re looking at 1.5% which is clearly well under the current rate of inflation.”
“For many investors, this is the first time they will have had to really give any consideration to this aspect of their portfolio. This inflation rate that we are at now, we’ve gotten there really rapidly in comparison to other peaks over the past 20 years.
For somebody in their mid-40s who may have not started investing until their early to mid-20s, this is the first time they will have really had to consider how inflation is impacting their portfolio.”
Simon agreed, adding:
“As an investor, you really have to look at your portfolio and say what parts of my portfolio can adapt to this higher inflation and how does that work for me.”
Turning their attention to the performance of the housing market in the UK – and in particular the positive outlook for the North East – Dan said:
“Demand certainly hasn’t wavered over the past few years in particular, given that we’ve had everything happening with Covid-19, the war in Ukraine, energy prices."
“People are hunting for a different type of product. We have a, what people are calling, ‘race for space’. Changing working practices, from being office-based to actually spending more time working from home, has driven people to look for a different product.
They’re looking for a bigger house, a garden, good transport links, good local amenities but also because they’re going to be spending more time in this house, they’re willing to look for something a little more expensive as well."
Dan pointed out:
“Over the next five years, London is forecast to have 5.6% house price growth, but if you look at the North East, Yorkshire and the North West, we’re approaching 20%.
I think that alone is a decent indication of the property market and its resilience and future growth potential."
Published 13/05/2022, updated 24/06/22.