Inflation-proof your portfolio with an investment in property

With inflation jumping 2% in the space of a month and the Consumer Price Index currently running at a staggering 9%, the UK economy is experiencing the kind of inflationary pressure it hasn’t seen for forty years. Rising oil and gas prices, the war in Ukraine and the lingering impact of the pandemic and Brexit on supply chains, have led to a significant rise in the cost of goods and services.

When you mix together geopolitical uncertainty, interest-rate hikes, concerns about the Chinese economy and output, inflation and changes in consumer trends post-Covid, the result is increased market volatility. Last week saw the highest volatility in the price of Bitcoin for two years, and since the beginning of the year, the FTSE 100 has moved in a range of 705 points, just shy of 10% of its overall value.

Inflation destroys value

Inflation erodes people’s spending power over time as well as the value of their savings, and makes investing far more uncertain. As an illustration, with inflation at 9% an investment of £1,000 would need to earn 9% interest simply to stand still; since the best rate on offer for a notice savings account is currently a meagre 1.63%, there’s little benefit putting your money into a savings account.

Property performs well in times of high inflation

Property is one of the very few asset classes that can weather the storm of a high inflationary environment, and one that tends to benefit as other assets lose value in real terms. Due to the essential nature of property (i.e. people need somewhere to live), it tends to withstand short-term shocks better than other, non-essential investments.

Property has proved its resilience time and time again, even during times of economic uncertainty. If you drew a line on a house price graph from 1972, when the average house cost just under £7,000, through the next 50 years to 2022, it would be easy to see that house prices have risen a staggering 4,000%. In just the last ten years, in fact, the average cost of a house has risen by 70% (from £167,854 to £286,079 today).

Historically, whenever the FTSE 100 has suffered a sustained fall, the UK House Price Index has correspondingly risen. In fact, Real Estate Investment Trusts (REITs), which invest in income-generating real estate including apartment blocks, tend to outperform the market when inflation is 7% or higher (and conversely underperform when inflation is 2.5% or lower). With rents and asset values increasing in times of inflation, REITs are often a first port of call for investors during inflationary periods.

Demand for property is at an all-time high

As the data shows, demand for property, both sales and rentals, is currently breaking all records. Since the beginning of 2020, when the average house in the UK cost £231,940, house prices have risen over 23%. Some property hotspots, such as Padstow in Cornwall, saw prices rise by 20% in the 12 months to December 2021. And the speed of increase is accelerating: nationally, prices have risen over 14% over the course of the last 12 months alone.

According to Rightmove, the current rental market is the most competitive ever recorded, with average rents in March 2022, 15% higher than they were two years previously.

The lack of housing on the market, coupled with a housing shortage across the UK generally, is keeping premiums under pressure. Until more stock comes on to the market, demand will continue to outpace supply and that will keep prices high, even in the face of rising interest rates and inflation.

Investing in property online is simple

One of the easiest ways to diversify your portfolio into property is by investing online. Acorn have a range of fixed-rate, fixed-term products to suit every investment objective, be that regular income, capital growth or both. Our online investments in Acorn developments offer returns that compare favourably with most other asset classes, in a [relatively stable/inflation-proofed] asset.

We offer redeemable shares in individual developments or a portfolio of Acorn developments, as well as peer-to-peer loans that can also be invested within an IFISA wrapper to achieve tax-free gains. Peer-to-peer loans offer investors particularly good rates because, by cutting out the middleman and lending to specialist organisations, they enable investors to receive both a premium, and a higher proportion of the interest.

There’s never been a better time to diversify your portfolio

Low interest rates over the last few years have diminished the rates of return on offer from cash investments, even before factoring in the negative impact of inflation. Online property investing is simple, quick, transparent and can offer inflation-beating returns in an asset that can weather the highs and lows of short-term economic uncertainty. There has never been a better time to diversify your portfolio.

If you’d like to find out more about Acorn’s range of property investment opportunities offering quarterly income or capital growth, please contact Investor Services on 0203 858 9881 or via email at investor.services@acornpg.org.

YOUR CAPITAL IS AT RISK IF YOU INVEST

Investment opportunities available via Acorn Property Invest are exclusively targeted at exempt investors who are experienced, knowledgeable and sophisticated enough to sufficiently understand the risks involved, and who are able to make their own decisions about suitability of those investment opportunities. All investors should seek an independent professional investment and tax advice before deciding to invest. Any historic performance of investment opportunities is NOT a guide or guarantee for future performance and any projections of future performance are not guaranteed. All investment opportunities available via Acorn Property Invest are NOT regulated by the Financial Conduct Authority (FCA) and you will NOT have access to Financial Services Compensation Scheme (FSCS) and may not have access to the Financial Ombudsman Service (FOS).