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Insight - how inflation and the cost of living impacts your investments

Inflation is at a 30-year high, having increased to 9% and experts predict that it could rise to 11% by the end of 2022. Living costs such as food, energy and fuel are spiralling upwards, and many households are facing difficult times. Continue reading to find out how this will impact your investments.


Many property investors are understandably worried about the impact of inflation and the cost of living on their investments. For example, investors who pay mortgages on their property could be impacted by increased mortgage rates due to the Bank of England increasing the Base Rate.


On the 4th of August, the Bank of England increased the base rate from 1.25% to 1.75%. As a result of this change, HMRC interest rates for late payments will increase - this will come into effect from the 15th of August for quarterly instalment payments and the 23rd of August for non-quarterly.

The Property Market

The property market has, however, remained resilient through the last few years of economic uncertainty and there is still a high demand for property due to the housing shortage in the UK. Investing in property is still one of the better forms of investment, especially for longer-term investments that generally benefit from property value increases.

As house building figures remain low and the unquestionable need for rental housing keeps growing, rental profits should remain consistent. This is as long as variables such as pricing, location and energy efficiency are taken into account when making new investments.

The Growing Importance of Energy Efficiency

With the rising cost of energy bills and upcoming changes to energy performance certifications, investors are starting to alter their investment strategies to adapt to the economic shifts in the UK.

The minimal allowance for Energy Performance Certificates are due to rise in 2025 from at least an E to a C rating, and investors are adapting their current investments to help to counteract the hike in the cost of living. Improvements will include further installation, solar panels and draught proofing in order to retain or increase property value. Likewise, when making new investments, greener developments will now play a bigger part in the consideration stage of investing.

Half of all landlords that were surveyed in February 2022 expect to make the necessary modifications to their portfolio homes during the next 12 months, according to a report cited by Get Ground. Only 9% of respondents stated that they would not make any modifications until the inflation rate was below 5%.

A second Get Ground study revealed the value tenants place on energy-efficient housing, stating that "98% of tenants would prefer to live in a green home’’ and 8% of respondents said they would even spend "20% extra" for a greener home.

Greener homes, ones that may help with the rise in household expenditures and have a lower impact on the environment, are becoming more and more in demand. These newly developed residences will soon be in great demand and short supply, which could result in higher rental income for savvy investors.

A report from Savils found a 17% difference in the value of a property between a EPC band B and a band F property.

Manchester‘s most sustainable new residential building is one of Advantage's latest Investments. These apartments are ideal for young professionals who are concerned about the environment and growing expenditures. Modern methods of construction and smart technology used throughout the flats offer tenants immediate benefits, as the devices adapt to their daily habits, helping to minimise total carbon footprint and expenses as much as possible.

This innovation will lead the way for greener homes. In 2022, this building will be completed and will be in high demand from tenants.

Long Term Investing

Long-term investing in property is still one of the better forms of investment, especially for investments that generally benefit from property value increases.

Choosing the right type of investment is more important than ever in the current economic climate.

Savvy investors frequently plan for economic shifts and diversify their portfolios to a degree that allows them to be responsive to changes in the market.

Investors who would like assistance managing their portfolio in light of rising inflation and living expenses are more than welcome to schedule a call with one of our agents to discuss their strategy further. Please email contact@advantageinvestment.co.uk.

*Advantage Investments are a property investment firm particularly focused on the North West of England


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