What Does Rising Inflation Mean for UK Property Investment?

On Wednesday 23 March, the Chancellor of the Exchequer Rishi Sunak announced the Spring Budget and discussed the current state of the UK economy. While there weren’t any specific announcements directly about the property market, some policies will still have an impact on the economy and UK property investment.

Many professionals in the property industry have said no news within the Spring Budget is good news. As tax hikes, particularly when it comes to Capital Gains Tax and Stamp Duty Land Tax for investors, have been rumoured, many are happy to see no changes announced in that respect. But how will the revealed economic policies and rising inflation affect the property market?

Here, we’re going to cover exactly what’s happening with the economy and inflation and what this means for UK property investment

The current economic picture

In the UK, inflation has increased to 6.2%, which is a 30-year high. It’s being predicted that it could top 8% later this year. Living costs, especially, energy, food and fuel prices, are rising at extraordinary rates. This steep rise in inflation and consumer prices has led to a cost-of-living crisis. 

With Russia invading Ukraine, this is expected to keep inflation higher for longer. Some policies that were announced within the Spring Budget were to relieve surging inflation. However, some feel the Chancellor didn’t go far enough, particularly as energy prices soar. 

Recently, the energy price cap was raised to a record high. This means the average home bill will rise by nearly £700 annually from April. And further rises are expected with many believing the energy price cap to be increased again in October.

Additionally, mortgage costs are on the rise and are expected to continue to increase over the next year. The Bank of England recently raised the base interest rate to 0.75% in mid-March. It’s the third consecutive increase with the base rate now at the highest level since March 2020. 

However, mortgage rates had been at record lows throughout the past two years. But with rising costs across the board, homebuyers and property investors will need to factor this into their finances.

Property investment during times of high inflation

Some landlords may be worried about rising inflation and how it will impact their profitability. Naturally, soaring energy bills are a worry for homeowners, investors and tenants alike. 

During times of high inflation, investing your money in property can prove to be a better form of investment, especially when investing with a long-term frame of mind. Property remains one of the best assets providing strong returns. While rising inflation can impact immediate profitability, professional investors rarely take a short-term outlook.

Additionally, the property market has remained remarkably resilient throughout recent political and economic uncertainty. There is an ongoing housing shortage, which makes UK property investment a strong choice for investors.

This supply and demand in-balance means landlords who invest in the right areas could see strong demand from tenants, while also seeing the value of their property increase over time. This makes bricks and mortar one of the most impressive investments around.

Looking at other ways to invest your money, the majority of saving accounts still have bog-standard interest rates. And the stock market is extremely tumultuous with the current economic uncertainty. While you could get lucky and invest in stocks on the rise, you could be much worse off if you make the wrong decision. 

This further highlights why property investment can be a better form of investment during times of high inflation. And with inflation expected to remain high for some time, it may be the right time to consider UK property investment.


If you are interested in UK property investment, here’s a guide packed with tips on how to invest. To discuss your options, contact our team of expert advisors.