The cost of food and fossil fuels has dramatically risen over the past year, which has an immediate effect on inflation. As of 2022, the Consumer Price Index (CPI) has showcased an increase of 9.9% up to August 2022.With these rises, many are wondering how investing in property can help them beat inflation.
Already, property has shown how reliable and stable its market can be. During these uncertain times, the property market has held strong, with increases of 13.1% from 2021, with further increases of 4%expected by the end of 2022. Already, when compared to the CPI, it is easy to see how investing in property can hedge an investor against inflation.
But how does it work?
Simply, holding onto your cash can lose you money. It has been reported that £100 in 2022 can purchase 9.4% less than in 2021. So, as of 2022, the longer you hold onto your savings, the less you will have. However, this can be easily redeemed by investing in alternatives such as property, which can generate high returns. Not only will you gain an asset that will return capital, but you will be keeping your cash in a product that has consistently proved itself as reliable and stable when compared to keeping your cash in a bank with low interest rates.
Inflation can drive house prices up. From food, electric and gas, these price increases make it harder for individuals to own their own home. This leads to a mass number of individuals being priced out of the housing market, leading to a demand in affordable homes. This gives the investor the upper hand as it allows them to set rental prices that are both affordable for renters but provides them with a great capital return.
These major points have been realised in the July 2022 House Price Index, which conclude that property prices have indeed remained strong:
· Average UK house prices increased by £6,000 between June and July this year, compared with a fall of £13,000 between the same months last year.
· The average UK house price was £292,000 in July 2022, which is £39,000 higher than this time last year.
· Average house prices increased over the year in England to £312,000 (16.4%), in Wales to £220,000(17.6%), in Scotland to £193,000 (9.9%) and in Northern Ireland to £169,000 (9.6%).
Ultimately, choosing to invest in property is a worthwhile venture that will see investors gaining high ROI when compared to traditional interest returning opportunities such as savings accounts, and will see investors beating inflation.